GST — Milestone for Indirect Tax Reform, CenGST 1st

Sarkaritel
By Sarkaritel July 9, 2014 14:14

GST — Milestone for Indirect Tax Reform, CenGST 1st


DTC — Clean Modern Replacement for existing IT laws

By TN Ashok

New Delhi, July 09: The pre-budget Economic Survey 2013-14 tabled in parliament today says that GST (Goods and Services Tax) will be a major milestone for Indirect Tax reforms as it will help replace all existing indirect taxes creating a national market, eliminating cascading taxes, and align taxation of imports and exports correctly.

This will improve export and production competitiveness of India. The implementation of a Central GST (CenGST) could be the first step towards the GST. Once the CenGST is implemented, and the information technology system for CenGST has worked, estimation risk will be lower and it will be easier for the centre and states to move to the GST.

In a non-market economy, in addition to laws, taxes and subsidies are used for encouraging or discouraging activities that the central planner considers good for the economy. India’s complex tax system suffers from problems in both structures and administration. Uneven and high tax rates and uneven tax treatment of similar economic activities have induced distortions in the behaviour of firms and households.

Tax reform in India can improve the ease of doing business and promote efficiency and productivity growth, the survey said.

Just as the GST is a transformation of indirect taxes, the DTC (Direct Taxes Code) is required as a clean modern replacement for the existing income tax law. As with the GST, the key objective must be a simplification with a clean conceptual core, and the removal of a large number of special cesses and exemptions that favour special interest groups. The tax system must move away from industrial policy, with incentives for one activity or another, towards a simple framework.

As with the GST, the DTC will yield gains by removing distortions of individual and corporate decision making, reducing compliance cost and litigation, and improving tax collections.

Sarkaritel
By Sarkaritel July 9, 2014 14:14