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GST The most Complex Structure with Second highest Tax Rate of the world
GST was expected to increase the rating of Country in “ease of doing business”. However, reversal has happened. India is downgraded as far as GST system is concern. Low level of trust on the
taxpayers has resulted in downgrading the GST system. Recently the world bank Bi-annual India Development update report was published on 14.03.2018, it has made public surprising that GST is Most complex & second highest tax rate in the world among 115 Countries which have a similar indirect tax system. Out of 115 countries, around 50 countries have a single tax rate in GST, while around 30 countries uses two slabs and only five countries including India uses non-Zero slabs.
Following are the remarkable point’s highlights of the World Bank Report:
- Annual administrative tax compliance cost of the Firms/businesses were increased.
- Working Capital is locked due to slow tax refund processing.
- Prevailing multiple tax rates requires the business to classify inputs and outputs based on tax rate along with the need to apply the correct rate.
- Businesses are required to match their invoices between their outputs and inputs to be eligible for the full/ partial input tax credit. So that they can decide their working capital requirement.
From the day one, the Government was trying to force the law on the taxpayers without tested system recently E-WAY bill has created Chaos. Government is trying to impose the procedure without required infrastructure in place.
Somehow, Government action does not match with the Government intention. Government was talking about “Ease of Business’ whereas it is making it complicated. Similar things were happening in UPA regime where P.Chidambaram has talked about simplification in income tax laws and has added more complication to it.
What should be done to improve the rating
1) Only two slabs or one slab be there (may remove 0 tax slab).
2) e-implementation be done phase wise manner rather than overnight.
3) Refund procedure be speedily done like income tax within 7 days.
Conclusion: Its time that the Government should learn from mistakes and let it show trust & faith on the taxpayers by making it taxpayers friendly. Government should design ‘key to success policy’ that minimizes compliance burden, minimizing different tax rates and limiting exemptions.