World Bank Says GST Is Complex, Tax Structure 2nd Highest Among All Nations!
Overall, World Bank is quite bullish on India’s economic development and progress.
World Bank has just released their biannual flagship report on India’s growth story, and there are some twists and surprises all right.
Overall, World Bank is quite bullish on India’s economic development and progress but has a caution as well: About GST.
World Bank: GST Is Complex, Tax Is 2nd Highest!
World Bank admits that GST or Goods and Services Tax which was rolled out last year has the capability to push India’s tax system and to encourage more growth.
But at the same time, they have said that GST is complex, and the existing tax structure is second highest in the world.
This comparison has been made against a list of 115 countries, where GST type in-direct taxation is in place.
Out of these 115 countries which use indirect taxation, 49 countries have single slab tax structure, 28 countries have two slabs, while only 5 countries have four or more slabs.
These 5 countries are India, Italy, Luxembourg, Pakistan and Ghana. And among these, India is the only country with 5 slabs.
As per World Bank, this is making the whole tax system complex, and compliance costs are also increasing.
In their report, World Bank said,
“High compliance costs are also arising because the prevalence of multiple tax rates implies a need to classify inputs and outputs based on the applicable tax rate. Along with the need to apply the correct rate, firms are required to match invoices between their outputs and inputs to be eligible for full input tax credit, which increases compliance costs further,”
Having said that, World Bank is pretty optimistic on the future, as GST will accelerate growth in the coming days.
The report said, “… industrial activity is poised to grow, with manufacturing expected to accelerate following the implementation of the GST, and agriculture will likely grow at its long-term average growth rate.”
Overall Economic Growth: Positive
Overall, World Bank has predicted that due to tax reforms, and a firm determination to push growth, India is on the right track as of now.
The woes of GST and demonetization is slowly wading off, as a growth rate of 7.5% is looking achievable, as per World Bank.
The press release from World Bank said:
“The Indian economy is set to revert to its trend growth rate of 7.5 percent in the coming years as it bottoms out from the impact of the Goods and Services Tax (GST) and demonetization..”
In order to achieve a growth rate of 8%, World Bank advises policy makers from India to focus on making banking more robust, to include greater financial inclusion, and to make financial institutions even more powerful.
Besides, in order to develop human potential, relentless focus on health, education and service delivery is crucial.
The report was presented by Junaid Ahmad, World Bank Country Director in India, who said that India needs to open up their economy even more, and private companies should be empowered to continue the growth story.
You can find the full report here.