The Goods and Services Tax (GST) which happens to be a consumption tax, has been recently implemented in India. However, there are 160 nations who have already implemented the similar tax system. France, being the leader to implement GST in 1954, and Malaysia being the second last one to implement GST in the year 2015. While it is known as Value Added Tax in some nations, the structure is same as Goods and Services Tax, being levied on the consumption of goods.
It is important to note that different nations have different points under their GST reform. But they have a common reason to prevent the theft associated with paying taxes as the people in the production chain used to manipulate their booklets to evade taxes.
Let us have a closer look at GST implementations in major nations of the world, beginning with the newest member in the GST family and moving to special elder ones.
1. India
The GST in India is a consumer based tax and shall be levied as many times the good is sold to a new consumer. It has tax slabs for categories of goods and exempts several very essential products of daily needs. The Indian GST starts from 5% and goes as high as 28%. It came into force from July 1, 2017.
2. Malaysia
The GST rate in Malaysia is fixed at a standard of 6%, w.e.f. April 1, 2015. The exemptions of Malaysian GST include agricultural products, poultry products and eggs, unprocessed meat, fish, first 300kWh of domestic electricity consumption, water for domestic consumption, exported goods, petrol, diesel and LPG, and several other selected services in Malaysia.
3. Canada
The GST implementation in Canada came into force in 1991 as a part of the Excise Duty Tax Act. It was a reform to replace the hidden 13.5% manufacturer's sales tax (MST). It is levied on the supplies of goods or services purchased in Canada, with exceptions to groceries, residential rent, and medical services, and financial services. It was challenged in 1997 by the merger of all taxes as Harmonized Sales Tax (HST) but in 2011, HST was converted to the old GST system, effective from April 1, 2013.
4. Australia
The GST in Australia is a value added tax at fixed rate of 10%. It has a versatile history as the first attempt to phase out the multiple taxes and duties in Australia as made in 1985, then in 1993 and then in 1998. It finally came into accent on 8th July 1999 as A New Tax System (Goods and Services Tax) Act 1999, became operational from July 1, 2000.
5. Singapore
The GST is charged against domestic consumption in Singapore. It is a multi-stage tax which is collected at every stage of the production and distribution chain. Introduced on April 1, 1994 at 3%, it was raised to 7% on July 1, 2007. In general, a supply is either taxable (7%) or exempts (0%). There are no other tax slabs in Singapore.
6. China
China first levied a tax on consumer goods in 1994 via the Interim Regulations on Consumption Tax, covering 11 categories of goods which included alcohol, fireworks and cigarettes. Luxury goods, high energy consuming vehicles, non renewable petroleum products, are all taxed under varying rate slabs. Amusingly, the Chinese Government in 2016, reduced tax rate from 30 % to 15 % on cosmetics to foster growth.
7. Egypt
Egypt currently levies GST on locally manufactured goods or imported goods except goods exempted by a special provision, at a standard rate of 10%, starting from 1991. Some commodities are 5% rated and for export is 0%. Educational services, health services, financial services and other professional services are also exempted from GST in Egypt. The payment of GST is to be made monthly.
8. Japan
The consumption tax in Japan was implemented in the year 1989 at 3%, while today it is charged at 5% (4% national consumption tax and a 1% local consumption tax). Soon after the increment in the tax rate, in the year 1997, Japan fell into recession. Recently in June 2012, a resolution was passed in the lower house to double the tax. However, due to Japan's economic situation the tax increment was delayed until 2017 and now, it is delayed until 2019.
9. New Zealand
The GST in New Zealand came into effect on October 1, 1986 with a uniform rate of 10%, with very few exemptions such as residential rents, donations, precious metals and financial services. Presently the tax rate is 15% and includes taxation on Non New Zealand suppliers of digital services.
10. France
In order to prevent cheating and smuggling due to high sales taxes and tariffs in France, the year 1954 saw GST implementations in France. Being the first nation, France has a dual GST system, CGST and SGST (like the one in India). The important feature is that the end consumers cannot recover GST on purchases, but businesses are able to recover GST on the products and services that they buy in order to produce further goods or services. All in all, all other nations adopted this model due to its economic benefits.
While the above nations are successfully strengthening their economy with GST regime, Hong Kong failed in its attempt to do so. The GST consultation in Hong Kong ignited a fierce debate amongst local tax payers, lawmakers, journalists and politicians in July, 2006. It did not see the world and died in December, 2006. The plan was withdrawn citing the lack of public support.
Also, we must learn a few things that nations did. The Malaysian Government released sector specific guidance paper(s) on tax treatment concerning each business sector, to prevent confusions from building up in the citizens and making the nation GST ready. India too shall benefit more and fix the popular discomfort in its people with this methodology.
No doubt, taxes provide the most important contribution to an economy, and so they must be carefully looked after.