Action on VAT

Having focused last week on corporate taxes, in this week’s column, we will be turning our attention to developments in the world of indirect taxation, starting with Bolivia, where lawmakers recently approved Law number 1391, which included value-added tax incentives for imported machinery for the construction, mining, agricultural, and industrial sectors.

The law provides for an exemption from VAT for imported machinery and tools and cargo vehicles for the aforementioned sectors, and has been introduced temporarily, for a period of one year.

In Australia, meanwhile, the emphasis was on increasing indirect taxes, with the OECD again having urged Australia to hike its goods and services tax rate, in its Economic Survey of Australia.

The report warned that changes to the tax mix are needed to respond to the vulnerability of the tax mix to an ageing population, arguing that hiking the goods and services tax rate or broadening the tax base would help to reduce Australia's heavy reliance on taxation of personal incomes.

In Indonesia, the Minister of Finance confirmed the Government intends to expand the value-added tax regime to some commodities, health services, and education services but will seek to shield low- and middle-income taxpayers.

Sri Mulyani Indrawati explained that the Government's proposals are targeted at the consumption of luxury items, non-essential medical procedures, such as plastic surgery, and some private sector education institutions that charge very high fees. She confirmed that legislation for the measures is currently being discussed, alongside subsidies to counteract the impact on low-income taxpayers, with the intention of expanding the tax base and improving the fairness of the tax system.

While in India, the authorities sought to clarify some elements of the country’s GST regime, following the recent 45th GST Council meeting.

The Council recommended numerous changes to GST rates for both goods and services and the extension until the end of the year of GST concessions for various medicines, including those used in the treatment of COVID-19. The Council also agreed on the introduction of a 28 percent rate of GST and cess of 12 percent on carbonated fruit drinks.

Among numerous other items, it was decided at the meeting that GST should not yet be introduced on petroleum products. Other notable decisions included an extension to the GST exemption for the transportation of goods by vessel and air from India to outside India, until September 30, 2022.

Lastly, the Council said it will issue circulars to remove "ambiguity" and mitigate legal disputes on various issues, including on the scope of "intermediary services"; and rules regarding the export of services. Until next week!