Goods & Service Tax of India- Tax Reform


The most popular Goods & Service Tax (GST) has been enforceable & active from July 1, 2017. Even as it considered as one of India’s biggest tax reforms, more than 140 countries across the world have already implemented the concept of ‘one nation one tax’. France was the first country to implement GST to reduce tax-evasion since then.

India has chosen the Canadian model of dual GST as it has a federal structure where the centre and states have the power to levy and collect taxes. Here is how Indian GST stacks up against other countries:

  1. Canada: – Canadian GST was introduced on January 1, 1991 By the Prime Minister Brian Mulroney to replace the hidden 13.5 per-cent of Manufactures sales tax (MST). It was started with 7per-cent in first phase and afterwards it was reduced to 6% on July 1, 2006. Now GST is levied on 5 per-cents. Goods and services related to basic needs such as drugs, medical services, groceries, agriculture are taxed at 0 per-cents GST.
  2. Brazil:- It also follows dual system. The federal tax imposed by centre varies not significantly 17 per-cents in Sao Paulo to 18 per-cents in Rio-de-Janeiro. It varies from 4 to 25 per-cents.
  3. China:- China adopted VAT simplified many conflicting tax system and is clocked at 17 per-cents besides other taxes.
  4. Australia:- Implemented GST in 2000, fixing the rate at 10 per-cents. The GST replaced the federal whole sale tax and state and territory taxes with a single tax of 10 per-cents.
  5. New-Zealand:- In the New-Zealand GST is fixed at 15 per-cent and is applicable on most indigenous goods and services, most imported goods and certain specified imported goods.

In India, where there are different strata of society to be looked after, it’s not possible to have an ideal GST. We are in good direction. We will prefer to have a single GST rate but after sometimes. That should be the ultimate goal instead of having too many complicated rates at least one or two rates should be there. India has implemented GST by introducing different tax rates and classified goods and services under different tax rates percentage. The Government of India introduced rating system in 12 per-cents, 28 per-cents, 15 per-cents, 18 per-cents. It can be seen that because of change in tax rate system many problems have raised and government of India have worked on it to make the GST more effective and successful.


GST: BOON or Bane to Indian Economy

GST– It is all about indirect tax in our country subsuming the major indirect taxes like custom duty, excise duty, service tax and value added tax (VAT).

The opposition political parties were not supporting the same despite several attempts by the government in power. GST is simply the streamlining of various indirect taxes in order to avoid the effect of cascading so that the final cost to consume will go down.

GST is levied by:-

It is consumption based tax. GST is collected at each stage of purchase or sale in the supply chain, Manufacturer, wholesaler or retailers have to pay the applicable GST rate and can Claim input GST through tax credit mechanism.

Types of GST

SGST:- State GST, collected by the state government.

CGST:- Central GST,  collected by the Central government.

IGST:-  Integrated GST, collected by the Central government.

The Advantages of GST:-

  • State level VAT is introduced in one country mainly to eradicate the cascading effect.
  • Instead of maintaining big records, returns and reporting accesses will find comfortable under GST. Cost will be reduced.
  • Due to full and seamless credit, manufacturer and traders do not have to pay tax.
  • Export of goods/services is not going to be taxed under GST.
  • Government will be able to cover every manufacturer, service provider by bringing Indirect taxes in same basket.

The Disadvantages of GST:-

  • VAT has been first introduced in 1998. This delay may lead to potential threat in GST.
  • Increase in revenue of state government where consumption is high.
  • A high GST will create more problems rather than problem solving.


GST  is not only the combination of VAT and indirect taxes but also step taken to eradicate the problems implementation of GST is likely to cause inflation at early stages, will surely result to more employment opportunities and economics growth in our country.

The above article is written by Ms. Priyanka Vishwakarma & Ashrita Biswas.

Note:- All the facts & Figures are collected from various sources and best of their knowledge.

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