INTERNATIONAL PERSPECTIVES ON GST / VAT:

VAT and GST are used inter-changeably as the latter denotescomprehensiveness of VAT by coverage of goods and services. France was thefirst country to implement VAT, in 1954. Presently, more than 160 countries haveimplemented GST / VAT in some form or the other. The most popular form ofVAT is where taxes paid on inputs are allowed to be adjusted in the liability at theoutput. The VAT or GST regime in practice varies from one country to another interms of its technical aspects like ‘definition of supply’, ‘extent of coverage ofgoods and services’, ‘treatment of exemptions and zero rating’ etc. However, at abroader level, it has one common principle, it is a destination based consumptiontax. From economic point of view, VAT is considered to be a superior system oversales tax of taxing consumption because the former is neutral in allocation ofresources as it taxes value addition. Besides, there are certain distinct advantagesof VAT. It is less cascading making the taxation system transparent and antiinflationary.From revenue point of view, VAT leads to greater compliancebecause of creation of transaction trails. 8 | 464.2 When compared globally, VAT structures are either overly centralizedwhere tax is levied and administered by the Central government (Germany,Switzerland, Austria), or dual GST structure wherein both Centre and Statesadminister tax independently (Canada) or with some co-ordination between thenational and sub-national entities (Brazil, Russia). While a centralized structurereduces fiscal autonomy for the States, a decentralized structure enhancescompliance burden for the taxpayers. Canada is a federal country with uniquemodel of taxation in which certain provinces have joined federal GST and othershave not. Provinces which administer their taxes separately are called ‘nonparticipatingprovinces’, whereas provinces which have teamed up with the FederalGovernment for tax administration are called ‘participating provinces’.4.3 The rate of GST varies across countries. While Malaysia has a lower rate of6% (Malaysia though scrapped GST in 2018 due to popular uproar against it),Hungary has one of the highest rate of 27%. Australia levies GST at the rate of10% whereas Canada has multiple rate slabs. The average rate of VAT across theEU is around 19.5%.
Location: Kerala, India

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