The Reserve Bank of India (RBI) had released a report on the experiences of 160 countries which had implemented the Goods and Services Tax (GST) or the Value Added Tax (VAT). The report notes how successfully the tax regimes were implemented in these countries and what could be the possible challenges India could face on July 1 when India implements the new tax regime. The report states that some risks are involved with the implementation of the GST, these risks are related to tax avoidance and tax evasion, according to the Indian Express.
The RBI report states that small businesses may not register in the GST Network (GSTN), 1) traders may not report complete sales figures, 2) traders could under the GST try to reduce their liability by exaggerating sales of items which may fall in a lower tax rate and 3) traders could also cheat the system by making false claims for refunds. The RBI report also warned that tax authorities need to guard against traders who collected tax but did not deposit the collected taxes to the government, IE reported.
The RBI report mentions the GST experience of countries such as Australia, Canada, Malaysia, New Zealand and Singapore. The report mentions that a few Canadian provinces impose their own sales tax over and above the GST, this additional sales tax creates a price distortion in the country.
Earlier in December 2015, Chief Economic Advisor (CEA) Arvind Subramanian through a report titled, ‘Report on the Revenue Neutral Rate and Structure of Rates for the Goods and Services Tax’ tried to compare the GST to large federal systems implemented by the European Union, Canada, Brazil, Indonesia, China and Australia. Subramanian in his report stated that most of the countries had faced serious challenges, as per the Indian Express report.