SOME GLOBAL GOODS & SERVICE TAX MODELS

[Dr. Sanjiv Agarwal]

Some of the popular GST models being practiced in various countries are as follows –

United Kingdom model

Value Added Tax (VAT) is a tax on consumption levied in the United Kingdom by the national government. It was introduced in 1st January, 1973 and is the third largest source of government revenue after income tax and National Insurance. Before 1973 the UK had a consumption tax called Purchase Tax, which was levied at different rates depending on the goods' luxuriousness. The general rate is 20% and reduced rate is 5%.

United States of America model

The United States does not impose a national-level sales or value-added tax. Sales taxes and complementary use taxes are imposed and administered at the state (sub national) and local (substate) levels. Currently, 45 of the 50 US states, the District of Columbia and Puerto Rico impose some form of sales and use tax. Only Alaska, Delaware, Montana, New Hampshire and Oregon do not impose such taxes.

Canadian model

Being a Federal State, Canada follows dual GST between Union and States having three components - Federal GST and Provincial Retail Sales Tax (PRST) being administered separately; joint federal and provincial VAT being administered federally and separate federal and provincial VAT being administered provincially only for Quebec. Introduced in 1905, present tax rate is 5%. Indian situation resembles to that of Canadian model.

Australian model

Australia follows a single GST which is a federal tax collected by Centre and distributed to States. GST was introduced in July 2010 and rate of tax is 10%. Indian situation is similar but States may not like to lose their autonomy.

Malaysian model

Goods and services tax (GST) in Malaysia, a value added tax, was scheduled to be implemented by the Government during the third quarter of 2011, but has not yet been implemented. The Government is still studying the possible impact of the tax. During the Government reading of the 2014 budget, Malaysian Prime Minister announced that GST @ 6% shall be imposed starting on April 1, 2015.

Singapore model

On the recommendation of the 1986 Economic Committee, Singapore's government decided to shift from direct to indirect taxes, to maintain its international competitiveness in attracting investments, and to sustain its economic growth. GST was first introduced in Singapore on 1st April 1994 at 3%. The GST rate was increased to 4% in 2003 and to 5% in 2004. The GST rate was raised to 7% in 2007.

GST AT A GLANCE - GLOBAL VIEW

	Year of Introduction	GST Rate
	June 1905
	April 1954	Standard rate : 20% reduced rate : 5.5% & 10%, super reduced rate of 2.1%
	January 1973	Standard rate : 20% reduced rate : 5%
	April 1989	Standard rate : 8%
	April 1994
	July 2000
	April 2015
	April 2016 (Proposed)	Suggested revenue neutral rate : 27%

Model Proposed for India

Empowered Committee has suggested dual model of GST in India with CGST, SGST and Inter State GST (IGST). India needs to adopt a GST system which is politically acceptable and administratively feasible. India is moving forward on EC’s recommended model.