Indian Model GST law vis-a-vis Global practices - Right foot forward?

December 15,2015
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Jigar Doshi, Partner, SKP Business Consulting LLP
Priyanka Naik, Manager
Ashesh Parekh, Executive

 

 

 

 

 

With countless deliberations and discussions on the proposed Goods and Services Tax (GST) in India and emergence of reports/documents in the public domain outlining the facets of framework and draft of the much-awaited GST law, the most awaited Indirect tax reform seems much of a reality than a distant dream. GST being a comprehensive indirect tax levy is expected to not only simplify but also integrate various businesses, making India a globally competitive market.

GST as a reform has been adopted globally by more than 160 countries, the latest being Malaysia and the largest being the European Union. While no country has a flawless taxation system, analysing and comparing the draft Indian Model GST Law[1](‘Model GST Law’) with International Tax Laws (especially with large economies such as Canada, Australia and EU), will help us appreciate the best practices being followed globally.

In this article, we have discussed the successful implementation of GST in other countries vis-à-vis the Model GST Law to be implemented in India.

GST STRUCTURE

India being a federal country, a ‘Dual GST’ structure is proposed to be implemented wherein both, the Centre and States will simultaneously levy GST across the value chain. The Central Government would levy and collect Central GST (CGST), and the State Governments would levy and collect the State GST (SGST) on all intra-state transactions. In case of inter-state supply of goods and/or services, Integrated GST (IGST), a combination of CGST and SGST is proposed to be levied.

When compared globally, GST structures are either overly centralised or in case of a dual GST structure, they are either administered independently or with minor coordination. In the following table, we compare GST structures of global economies which broadly outline the nature of GST law:

Nature of VAT

Countries

Disadvantages

Independent VATs at Centre and States

Brazil, Russia, Argentina

Differences in the base and rates weaken administration and compliance.
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