France is the first country to implement GST. Do you know why? As the tax evasion is high, GST was introduced in France in 1954. When the GST has been implemented in France, the tax on Goods and Service tax has been imposed as the indirect tax levy on manufacture, sale, and consumption of goods as well as services at the national level.
Let us understand the reason behind implementing GST and what is France GST model
France’s VAT model comes up with four rates similar to the Indian GST structure. Since France is the first country, it has religiously stuck with four tax structures under the ratio 2:1 percent, 5.5 percent, 10 percent, and 20 percent respectively.
With multiple tax structures, France is really experiencing a breath-taking realm in item categorization. Though it is the scenario, any tax rate above 18 percent is arbitrary in nature.
Not only in France, as the days passed by, but GST has also been implemented in several countries including Russia, India, Germany, Italy. The GST rates range from 5 percent in Taiwan to 25 percent in Denmark. Recently, Saudi Arabia has implemented GST in 2018.
Along with this let us also understand abut GST in different countries:
India’s 28 percent GST rate is the highest among all other countries. The GST Council, the governing body of the regime, is currently focusing on strategies to refine the existing tax structure. India, like most other countries, follows the dual structure allowing both the Centre and the state to divide tax from the sale of a product or good.
GST registration is mandatory for every taxpayer in India, the business people who supply goods with the annual turnover of rupees 40 lakhs should apply for GST registration and the one which supplies services with the annual turnover of rupees 20 lakhs should apply for GST registration in India.
France’s VAT model consists of four rates, making it similar to the Indian GST tax structure. Since it became the first country to implement it in 1954, France has religiously stuck to four tax structures: 2.1 percent, 5.5 percent, 10 percent, and 20 percent.
Having multiple tax structures offers more breathing space in terms of item categorization. However, many economists complain that any tax rate above 18 percent is arbitrary in nature.
Canada’s GST model is what India is trying to achieve: A 5 percent tax on supply of either goods or services. In comparison to India’s sin tax (currently at 28 percent), a Harmonised Sales Tax (HST) is collected in Canada on certain products in addition to GST. Canada, like India, follows a dual-GST regime.
Since 2011, the United Kingdom’s uniform VAT levied on goods and services was increased to 20 percent one of the reasons which make London one of the most expensive cities in the world. In such a scenario, citizens are left with no choice but to pay a 20 percent uniform tax rate on all products and services. In comparison, India’s multiple tax brackets have helped in better tax categorization of products.
Australia and New Zealand
Out of 160 countries that have implemented GST, many countries are still figuring out ways to streamline the tax structure, but not Australia and New Zealand.
While Australia, since introducing GST in 2000, has kept the rate unchanged at 10 percent, New Zealand in 2010 increased it from 10 percent to 15 percent the first change since its implementation in 1986.
However, this single tax structure can lead to significant problems in case of drastic global change. However, single rate taxation would be difficult to implement in India due to several factors like the wealth gap.
In Singapore, GST was introduced in 1994 at a uniform rate of 3 percent. However, it was raised by a percentile almost a decade later in 2003 and was increased to 5 percent by 2004. It was again raised to 7 percent in 2007. The country has had a shaky run with the GST as inflation trajectory spiked.
The standard rate of VAT in China is set at 17 percent, which is considered ideal by many economists within the country and across borders. Eliminating its precursor, the Business tax system has helped the nation cope significantly with its real estate woes.