Tax rates of GST, 2nd highest globally: World Bank

Implemented on July 1, 2017, the GST has been called one of the most complex taxes, with the second highest tax rate in the world among a sample of 115 countries which have a similar indirect tax system, the World Bank said in its bi-annual India Development Update released.

The GST has four tax slabs that are, 5%, 12%, 18%, and 28%. Currently, around 49 nations use a single GST slab of GST, while 28 countries use two slabs. Besides India, there are only five countries, which use four non-zero slabs.

The other countries are Italy, Luxembourg, Pakistan and Ghana, which makes India with the highest number of different GST slabs in the world. However, the World Bank said while the constant adjustment in various tax slabs can affect economic activity for multiple months, the benefits of the GST are to outweigh its costs in the long run.

“Key to success is a policy design that minimizes compliance burden, for example by minimising the number of different rates and limiting exemptions, with simple laws and procedures, an appropriately structured and resourced administration, compliance strategies based on a balanced mix of education and assistance programs and risk-based audit programmes,” it said. Meanwhile, the World Bank projected India’s GDP growth at 7.3% for the next financial year and accelerate further to 7.5% in 2019-20. 

World Bank’s biannual publication, India Development Update: India’s Growth Story, expects the economy to clock a growth rate of 6.7% in the current fiscal ending March 31. The report observed that a growth of over 8% will require “continued reform and a widening of their scope” aimed at resolving issues related to credit and investment, and enhancing competitiveness of exports.