GST brings cheer but globally tax rate is highest

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Even as the standard rate in GST has been kept at 18 per cent, the tax slab of 28 per cent for products like refrigerators, soft drinks and cars means India has the highest rate in the world.

Air conditioners, refrigerators, aerated drinks, pan masala (with cess), tobacco (with cess) and cars figure in the highest slab of 28 per cent. On top of the peak rate, small cars will attract 1 per cent cess, mid-sized cars 3 per cent and luxury cars 15 per cent cess.

Compared to this, the standard rate in France, which has been following a one nation, one tax regime since 1954, is 20 per cent and other rates vary between 1 per cent and 10 per cent. Germany, which introduced the one tax formula in 1968, currently levies 19 per cent standard rate. But, it has kept another rate at 7 per cent for some commodities.

The highest tax rate of 28 per cent in India will be closer only to highest tax slab of 27 per cent prevalent in Argentina for a few commodities. Barring Argentina and China, other slabs – not the standard rate – in countries are either 10 per cent or less.

France, Germany, the Netherlands, Italy and Argentina are the only countries where the standard rate is higher than that of India’s 18 per cent while Russia is at par. All other countries – Korea (10 per cent), Mexico (16 per cent), Indonesia (10 per cent), New Zealand (15 per cent), Japan (8 per cent), South Africa (14 per cent), Singapore (7 per cent), China (17 per cent), Australia (10 per cent) and Malaysia (6 per cent) have lower rate than India.

Countries in south-east Asia have kept standard rate at very low level. Korea, Indonesia, Malaysia and Singapore follow one rate across the country for all goods and services.

The Goods and Services (GST) Council on May 18 approved the one nation one tax rates for 1,211 items by keeping four slabs – 28 per cent, 18 per cent, 12 per cent and 5 per cent. Of the total goods and services mentioned, 7 per cent will have zero duty and 43 per cent will

attract the standard 18 per cent rate.

The Centre and states have also agreed that 14 per cent of the items will be in the 5 per cent slab, 17 per cent in the 12 per cent category and 19 per cent of goods and services will go into the top tax bracket of 28 per cent.

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