English हिन्दी
Connect with us

Latest business news

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

Published

7 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.

Related Topics:
Continue Reading

Cricket news

Video of Bill Gates enjoying Vada Pav with Sachin Tendulkar during Mumbai visit goes viral

Gates, currently touring India, has been making waves with high-profile engagements. Earlier this week, he touched down in New Delhi, where he held discussions with Prime Minister Narendra Modi and several Union ministers.

Published

7 days ago

on

March 21, 2025

By

Microsoft co-founder and philanthropist Bill Gates delighted his followers by posting an Instagram video featuring Indian cricket icon Sachin Tendulkar, with the playful caption, “A snack break before we get to work.” The brief clip captures the duo relishing Mumbai’s beloved street food, vada pav, whilst perched on a bench, ending with a teasing “Serving soon” message splashed across the screen.

Gates, currently touring India, has been making waves with high-profile engagements. Earlier this week, he touched down in New Delhi, where he held discussions with Prime Minister Narendra Modi and several Union ministers. His itinerary then brought him to Mumbai, where he met Maharashtra Chief Minister Devendra Fadnavis. The tech titan’s visit underscores his ongoing fascination with India’s innovative spirit, a theme he expanded upon in a recent blog post.

https://www.instagram.com/reel/DHbYDGXJnxq/?utm_source=ig_web_button_share_sheet

Writing on his personal site, Gates reflected on the trip’s impact: “I came away with fresh perspectives because India is brimming with clever, driven individuals addressing some of the globe’s toughest challenges in ingenious ways.” His words echo sentiments he shared ahead of the visit, when he praised Odisha’s farmers for leveraging artificial intelligence to boost agricultural outcomes—a story that’s garnered attention for its blend of tradition and technology.

The vada pav moment with Tendulkar, a national treasure, adds a light-hearted touch to Gates’s packed schedule. It’s not just a snack break; it hints at a potential collaboration, though details remain under wraps. For Indian fans, seeing two legends—one from tech, the other from cricket—share a casual bite is a rare treat, blending global influence with local flavour.

As Gates continues his journey, his interactions spotlight India’s dual role as a hub of innovation and a cultural powerhouse. Whether it’s AI-driven farming or a street-side snack with a sporting hero, his visit is proving to be a feast of ideas—and vada pav.

Continue Reading

Latest business news

Manappuram Finance shares hit record high after Bain Capital announces $508 million stake deal

Shares of Manappuram Finance surged to an all-time high after Bain Capital announced plans to acquire an 18% stake in the gold loan provider.

Published

1 week ago

on

March 21, 2025

By

Manappuram Finance shares rise after Bain Capital deal

India’s gold loan provider Manappuram Finance saw its shares soar to an all-time high on Friday after Bain Capital revealed plans to invest $508 million for an 18% stake in the company. The move, analysts say, brings clarity to Manappuram’s management succession strategy and paves the way for stronger strategic control.

Bain Capital, a U.S.-based private equity firm, will subscribe to Manappuram’s shares and warrants at Rs 236 per share — a 9% premium over Thursday’s closing price of Rs 217.5. Following the transaction, Bain will jointly control the company along with other key stakeholders, referred to as ‘promoters’ under Indian regulations.

As of 12:05 p.m. IST on Friday, Manappuram’s shares surged by as much as 6.3% to Rs 231.08, marking their highest level on record.

Founder to step back as Bain gains influence

Founder and CEO V.P. Nandakumar, who has led the company for nearly four decades, will transition to the role of non-executive chairman once the investment is finalized. With Bain Capital now having rights to influence strategic decisions and appoint key roles including the CEO, analysts at Jefferies and CLSA have responded positively.

CLSA noted that the potential for re-rating of Manappuram’s stock is strong as new leadership takes over. Jefferies and CLSA have both raised their target prices by 14.6% and 20%, respectively, maintaining bullish ratings of “buy” and “outperform.”

Deal to boost gold loan business, offset microfinance losses

The deal is expected to close in the upcoming financial year and is likely to accelerate growth in the company’s gold loan segment, which currently contributes around 75% of its total revenue. With gold prices at historic highs, the demand for gold-backed loans remains robust.

Additionally, analysts expect part of the capital raised through the deal may be used to cushion the losses in Manappuram’s microfinance division. The company confirmed that Asirvad Micro Finance, its microfinance subsidiary, will withdraw its IPO draft filing amid changing market conditions and regulatory scrutiny.

Continue Reading

Latest business news

Alphabet’s $32 billion acquisition of Wiz marks biggest cybersecurity push

Alphabet has announced a $32 billion deal to acquire Wiz, reinforcing its cloud security offerings as it competes with AWS and Microsoft Azure.

Published

1 week ago

on

March 19, 2025

By

Alphabet to acquire Wiz for $32 billion to boost cloud security

Alphabet, the parent company of Google, has announced its largest acquisition to date with a $32 billion deal to buy cybersecurity startup Wiz. The move signals Alphabet’s aggressive expansion in cloud security as it competes with Amazon Web Services and Microsoft Azure in the cloud computing market.

A strategic investment in cybersecurity

The acquisition will integrate Wiz into Google Cloud, reinforcing its security capabilities to help businesses mitigate cyber risks. The deal, which follows Alphabet’s previously unsuccessful $23 billion bid, underscores the company’s commitment to securing a stronger foothold in the cloud security space.

Wiz, an Israel-based firm, provides security solutions that work across major cloud providers, including Amazon Web Services, Microsoft Azure, and Google Cloud. The company has gained significant traction, boasting clients such as Morgan Stanley, BMW, and LVMH.

Regulatory scrutiny and financial impact

Despite the high price tag, Alphabet appears confident in securing regulatory approval under the new U.S. administration, which has maintained a watchful eye on major tech mergers. Notably, the termination fee—over $3.2 billion—stands among the highest in M&A history, signaling both parties’ commitment to closing the deal.

Alphabet’s stock dipped nearly 3% following the announcement, reflecting investor concerns over its heavy spending, particularly in AI and cloud computing. The company may need external financing, given its cash reserves of approximately $23.47 billion as of December 31, 2024.

Growing importance of cybersecurity

The acquisition highlights the increasing demand for cybersecurity solutions, especially in light of last year’s global CrowdStrike outage that disrupted businesses worldwide. Analysts suggest that for Google Cloud to compete effectively with Microsoft Azure, it must offer a more comprehensive suite of security services.

Alphabet expects the deal to be finalized in 2026, pending regulatory approvals. Meanwhile, Wiz will continue providing its services across multiple cloud platforms, potentially alleviating antitrust concerns.

Continue Reading

Trending

© Copyright 2022 APNLIVE.com