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GST in India among most complex in the world, is second highest in tax rate: World Bank

Published

8 years ago

on

GST

If the goods and services tax (GST) system and rates have got you reaching out for pills to quell a headache, you will derive satisfaction from a World Bank report that agrees with you.

The GST system introduced by Narendra Modi government in India on July 1 last year is among the most complex in the world and is the second highest in tax rate, said the World Bank in a report covering 115 countries with similar indirect tax system.

The World Bank, in its bi-annual India Development Update released on Wednesday, March 14, said the complexity of India’s GST, was due to “higher tax rates and large number of tax slabs” compared with similar systems in other countries. GST has multiple tax rates of 0, 5, 12, 18, and 28%. Separately, gold is taxed at 3 percent, precious stones at 0.25 percent.

Further, there are several exempted sales and exports are zero rated, which allows exporters to claim refund for taxes paid on inputs that go into production process.

Alcohol, petroleum products, stamp duties on real estate and electricity duties are excluded from the GST and continue to be taxed by the state governments at state-specific rates.

This compares unfavourably with other regimes across the world as most countries have a single rate of GST. For example, the report said, India’s highest slab of 28% is the second-highest among 115 sampled countries and the highest in Asia.

The report said that 49 countries use a single rate, 28 use two rates, and only five including India use four non-zero slabs. The countries that use four or more rates of GST include Italy, Luxembourg, Pakistan and Ghana. Thus, India has among the highest number of different GST rates in the world.

The threshold of Rs 1.5 crore of annual turnover under GST for companies to opt for a simpler compliance regime with a flat tax rate called ‘composition scheme’ is also highest among 31 countries, the report said.

The World Bank report also argued against exemptions provided in the GST structure as these reduced the tax base and compromised on the logic of the GST by reintroducing cascading of taxes. “While exemptions allow easing the tax burden on items with high social value, such as healthcare… it creates incentives for vertical integration to keep the exempt status and raise compliance costs by making it necessary to allocate input taxes between exempt and non-exempt output when manufactured or traded together,” the report said.

The World Bank report said the introduction of GST has been accompanied by state administrations experiencing disruptions in initial days after GST’s introduction. This included lack of clarity on discontinuation of local taxes, for example, in Tamil Nadu where the state government devolved an entertainment tax to local governments in order to impose it over and above a 28% GST. To preserve revenue collections, Maharashtra has also increased motor vehicles tax to compensate for losses due to GST.

There also have been reports of an increased administrative tax compliance burden on firms and a locking-up of working capital due to slow tax refund processing, the 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,” it added.

“While international experience suggests that the adjustment process can affect economic activity for multiple months, the benefits of the GST are likely to outweigh its costs in the long run. It added that the key to success of GST was a policy design that minimises compliance burden by cutting number of rate slabs and limiting exemptions with simple laws and procedures, an appropriately structured and resourced administration,” the report said.

The GST was intended to replaced multiple tariffs and levies imposed by the centre and states and bring a uniform system. While the GST Council — the decision-making body for GST — had put well over 200 items in the highest bracket of 28% at the time of roll-out, it has since reduced the items under the slab to 50.

Finance minister Arun Jaitley has said there’s scope to merge 12 percent and 18 percent slabs in order to make it more transparent, efficient and tax payer-friendly.

While the government assured that GST will help curb black or untaxed money and steadily expand the base of taxpayers, complicated tax slabs and lack of proper IT infrastructure have become a problem for businesses.

But there is “positive impulse” expected from GST system as it is likely to improve the domestic flow of goods and services, contribute to the formalization of the economy and sustainably enhance growth, the World Bank observed.

However, notwithstanding the recent momentum, India will have to address several structural challenges to attain a growth rate of 8 percent and higher on a sustained basis, the World Bank said.

India would need to boost private investments and exports – its two lagging engines of growth – while maintaining its hard-won macroeconomic stability to boost growth.

“This will require continued impetus for structural reforms. Resorting to countercyclical policies will not help spur sustained growth and India should not compromise its hard-earned fiscal discipline in order to accelerate growth,” said Poonam Gupta, lead economist and the main author of the report.

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Union Budget 2026 highlights: Nirmala Sitharaman Raises Capex to Rs 12.2 Lakh Cr, West Bengal Gets Major Allocation

Finance Minister Nirmala Sitharaman is presenting the Union Budget 2026 in Parliament today. Follow this space for live updates, key announcements, and policy insights.

Published

6 days ago

on

February 1, 2026

By

Finance Minister Nirmala Sitharaman arrives to present Union Budget 2026

Finance Minister Nirmala Sitharaman will shortly present the Union Budget 2026 in the Lok Sabha, marking her ninth consecutive Budget. The annual financial statement is expected to outline the government’s policy priorities, reform agenda and spending plans for the coming year. Stay tuned for live updates, key announcements and immediate reactions as the Budget speech unfolds.

Finance Minister Nirmala Sitharaman tabled her ninth Union Budget today, beginning her speech at 11 am.

Nirmala Sitharaman is set to present her ninth Union Budget today, with the finance minister scheduled to begin her speech at 11 am.

Budget 2026 live updates: Presenting the Union Budget for 2026–27, Finance Minister Nirmala Sitharaman said the occasion coincided with Magh Purnima and the birth anniversary of Guru Ravidas. She noted that over the past 12 years, India’s economic journey has been defined by stability, fiscal discipline, sustained growth and moderate inflation.

The budgeted fiscal deficit for fiscal 2026 is estimated at 4.4 per cent of gross domestic product (GDP)

Planned capital expenditure this fiscal year Rs 11.2 lakh crore

Rare earth corrdiors in Odisha and Kerala

Hi-tech tool rooms to be set up by PSUs

Construction equipment scheme to be launched

Container manufacturing scheme for Rs 10,000 crore over 5 years

Rs 10,000 crore SME Growth Fund

Semi-conductor mission to get Rs 40,000 crore

Rs 12.2 lakh crores for infrastructure development

Dedicated RITES to repurpose land of Central PSUs

20 new waterways over next 5 years to be connected

7 high-speed corridors on rail

High-level committee on banking for next phase of Viksit Bharat

Capital expenditure hike of to ₹12.2 lakh crore in Budget 2026, with West Bengal receiving a significant share of allocations.

Mahatma Gandhi Gram Swaraj Initiative aimed at boosting the khadi, handloom, and handicrafts sectors.

High-speed rail corridors: Mumbai-Pune, Pune-Bengaluru, Hyderabad-Bengaluru, Chennai-Bengaluru, Delhi-Varanasi, Varanasi-Siliguri, Pune-Hyderabad

Five university campuses to be established near industrial corridors

Lakpati Didi program expanded in Budget 2026 to reach more beneficiaries across India.

Fiscal deficit for FY26 revised to 4.4%; Budget Estimate for FY27 set at 4.3%.

TCS on overseas tour packages cut to 2% to ease travel costs

Tax holiday to foreign companies that provide cloud services by setting up data centres in India till 2047

17 cancer drugs exempted from import duties

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India News

Union budget 2026 to be presented on Sunday with special trading session

The Union Budget 2026 will be presented on a Sunday for the first time in over two decades, with NSE and BSE announcing special trading sessions for the day.

Published

7 days ago

on

January 31, 2026

By

Nirmala Sitharaman

For the first time in more than two decades, the Union Budget will be presented on a Sunday. Finance Minister Nirmala Sitharaman is scheduled to table the Union Budget for 2026 in the Lok Sabha on February 1 at 11 am, even as the day is usually observed as a holiday for government offices and financial markets.

February 1 falls on a Sunday this year, raising questions about market operations and investor response. To ensure uninterrupted trading and immediate market reaction to budget announcements, stock exchanges have announced special arrangements for the day.

Markets to remain open on budget day

Both the National Stock Exchange and the Bombay Stock Exchange have confirmed that markets will remain open on February 1. The NSE has announced a special trading session, with the pre-open market scheduled from 9 am to 9:08 am, followed by normal trading hours from 9:15 am to 3:30 pm.

The BSE has also declared the day a special trading day, with regular market hours applicable. Trading is expected to continue across equity, derivatives, and futures and options segments.

What the Sunday budget means for investors

A weekend budget presentation is seen as offering certain advantages for market participants. With trading active on the same day, investors will be able to respond to policy announcements immediately rather than waiting for the next working day.

The Sunday timing also gives investors, analysts, and financial institutions additional time to go through detailed proposals, including tax changes, fiscal deficit targets, and sector-wise allocations. The extended window for analysis may help reduce sharp, headline-driven reactions and encourage more informed decision-making.

With fewer competing developments on a non-working day, budget announcements are also expected to receive more focused attention from markets and stakeholders.

Parliamentary schedule and key milestones

The Economic Survey is expected to be tabled on January 29, ahead of the budget presentation. The Budget Session of Parliament began on January 28 with the President’s address to a joint sitting of the Lok Sabha and Rajya Sabha.

The upcoming budget will mark Nirmala Sitharaman’s ninth consecutive Union Budget. It will also be India’s 80th budget since Independence. Since 2017, Union Budgets have been presented at 11 am on February 1, following a timing change introduced during the tenure of former finance minister Arun Jaitley.

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Modi says right time to invest in Indian shipping sector; meets global CEOs

Published

3 months ago

on

October 29, 2025

By

PM Narendra Modi

Prime Minister Narendra Modi on Wednesday exhorted global investors to take bets on the Indian shipping sector, pointing out that this is the “right time” for such a move.

The Prime Minister also met a select chief executives of global majors, including DP World and APM, at a specially convened meeting on the sidelines of the India Maritime Week 2025 held here.

“For all of you hailing from different countries, this is the right time to work in the Indian shipping sector and also expand (your presence),” Modi said during a public address before the closed-door meeting with CEOs.

Modi listed several targets being chased by India in the maritime sector over the next few years, and underlined the importance of the global community in the same.

“You all are an important partner who will help us achieve all our aims. We welcome your ideas, innovations and investments,” Modi said.

He said that India allows 100 per cent foreign direct investment in the shipping and ports sector, and also provides incentives under the “Make In India, and Make For The World” vision.

Addressing an audience, including leaders of various companies, the Prime Minister affirmed India’s commitment to strengthening the supply chain resilience at a global level.

He also said that India is engaged in creating world-class mega ports, and cited the work undertaken on the Vadhavan Port to the north of the financial capital, which entered the top-10 firms in the world on the first day.

The government is also looking to grow the capacity at 12 major ports by four times and increase India’s share in containerised cargo at the global level.

Later, Modi held a meeting with top CEOs of shipping sector companies from across the world.

As per people in the know, he met AP Moller-Maersk Chairman Robert Maersk Uggla, DP World Group Chairman Sultan Ahmed bin Sulayem, Mediterranean Shipping Company Chief Executive Soren Toft, Adani Ports and SEZ Managing Director Karan Adani and French company CMA-CGM’s Senior Vice President Ludovic Renou.

The participation from over 85 countries in the IMW sends a strong message, Modi said, noting the presence of CEOs of major shipping giants, startups, policymakers, and innovators at the event.

The Prime Minister also thanked Port of Singapore (PSA) for the nearly Rs 8,000 crore investment in the Jawaharlal Nehru Port Authority’s fourth terminal, pointing out that this is also the largest FDI in the port sector in India.

Modi said more than 150 new initiatives have been launched under the ‘Maritime India Vision’, resulting in nearly doubling the capacity of major ports, a substantial reduction in turnaround time, and a new momentum in cruise tourism.

—PTI

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