The Goods and Services Tax or GST is a tax imposed on the supply of goods and services, primarily to generate revenue for the Government. The history of GST in India goes back to 1961. The GST Model in India has been modelled on the lines of the Indian Income Tax Act, 1961. The objective is to replace a multiplicity of taxes levied by different authorities at different points in time with one unified tax which will ultimately lead to a cashless economy and check evasion through documentation of all transactions. India is one of the most diverse countries in the world. Having different cultures, languages and traditions has contributed to the richness and diversity of this nation. One of the great things that we can learn from other countries is their tax systems and we will be focusing on how India’s GST model compares with GST in other countries.
We all know in India this system of taxation is known as Goods and service tax whereas in Canada it is referred to as Federal Goods and Service Tax & Harmonized Sales Tax. In the United Kingdom, the same system of taxation is known as Value added tax. However, in Singapore and Malaysia, the name is the same as in India.
2. Threshold exemption limit
In India the threshold exemption limit is 20 lakhs, in Canada it is 15.6 lakhs however in the UK it is much larger at approximately 61.32 lakhs. In Singapore, the threshold exemption limit is 7% whereas in Malaysia it is 6%.
3. Liability date
The liability for GST in India and Canada arises on an accrual basis where the liability begins when the invoice is issued or on the date on which the receipt is paid. In Canada, the liability arises on an accrual basis but the liability starts when the invoice is issued or paid for or the supply is made. In Malaysia, the liability arises on the delivery of goods or the issue of invoices or the receipt of payment. However, in Singapore, liability arises on the issue of invoice or receipt of payment.
4. Returns and payments
In India, the GST is returned and the payment is made on a monthly and an annual basis. In Canada, the GST is paid on a monthly, quarterly or annual basis depending on the turnover. In the UK the returns can be made quarterly however for small businesses payment frequency is optional and can be made annually as well. In Malaysia the payment has to be made monthly whereas in Singapore it is quarterly however, it could be monthly as well.
5. Reverse charge mechanism
In India and UK GST, a reverse charge mechanism is applied to goods and services. Whereas in Canada the reverse charge mechanism is applied to the importation of services and also on intangible properties. The reverse charge mechanism in Singapore applies to the supply of services whereas in Indonesia this mechanism applies to imported services.
6. Exempt services
In the case of the manufacture of exempted goods or the provision of exempted services, GST is not applicable in India. However, GST on ac and laptops and other things not mentioned in the exempted list is still valid. You can visit Khatabook to learn which goods and services are exempted and not exempted. In Canada, real estate, health, education, residential rent and provisioning financial services are exempted from GST. Whereas in the UK, services that are exempt from GST include Medical services, insurance, finance, education and postal services. In Singapore real estate, financial services and residential rental are exempt from GST. However, in Indonesia, basic food, health, transportation, agricultural land and residential properties are exempt from GST charges.