India is all set to implement the Goods and Service Tax (GST). The govt is all geared with most of the necessary preparations completed and on the intervening night of June 30-July 1 the nation will switch over to its biggest tax reform -- GST.
An hour long function will be held at the historic Central Hall of the Parliament on midnight of June 30 where the finance minister Arun Jaitley will brief opposition parties about the centralised tax model.
As far as we Indians are concerned, no one is sure of its after effects. What would exactly happen after the implementation of GST? Arun Jaitley has already said it may have "transient impact" and would bend down inflation in the longer run. Something similar he said after demonetisation.
However, the opposition parties are of different views but they are also not directly opposing it. The main opposition Congress had given its conditional support to centre's GST but the reserve bank of India feels it would be a "game changer" for country's economy.
The biggest ever tax reform of India is not something India has pioneered. In fact, India is a late entrant and there are around 160 countries that have already implemented GST or VAT(substitute for GST) in some form or other.
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France was the first country, who, in 1954 first introduced GST and the trend was later followed by countries like Germany, Italy, Canada, China and many others. Even, Pakistan has a centralised tax system. Saudi Arabia also plans to implement it by 2018.
India's tax regime would be a dual GST model, similar to Canada, which is the only country so far to have such a tax model. It will include taxes at Central level (CGST) and state level (SGST).
The GST Council has already finalised tax rates on 80-90% of goods and services under the four-slab structure. Essential items of daily use are kept under the lowest bracket of 5 per cent.
So far, there are 16 current levies seven central taxes including excise duty and service tax and nine state taxes like value added tax and entertainment tax. The GST will replace them all. Therefore, the nation will have one market with one tax rate.
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India will have standard tax rates at 12.5% to 15.5 % on goods and services while other rates would be at 20%, 4-5.5%, 1% and 0%.
The table below exhibits the rates (GST, VAT, Sales Tax) of countries with centralised tax system:
GST: Comparative analysis of centralised tax rates across nations