Big agenda for tax reforms in the new year
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The last week of 2012 was an extraordinarily tough week for the tax officials in North Block. As sudent demonstrators fought intense battles with the police, blocking off the main roads to Raisina Hill, the tax officials taking detours had to face even tougher challenges inside the building. The most daunting being the challenge of meeting the deadline for rolling out the Direct Taxes Code and the Goods & Services Tax, the two big game changers on the taxation front.
For the New Year, the battle lines have been drawn by the Parthasarathi Shome committee for direct tax and the empowered committee of state finance ministers for indirect tax.
The reasons for the domestic cliff to have arisen is the way 2012 panned out. Last year can actually be split into two halves for tax policy purposes. The second half, from about the time when Prime Minister Manmohan Singh in July asked for standstill on the tax policies, was spent undoing the changes made in the first half.
The outcomes crafted by the tax officials will determine when the revised DTC and the GST will be introduced. Both of them have missed their respective deadlines. A Citibank research report issued in December notes the GST could add 1.2 per cent to the government revenues, at the same time cutting down rates on some of the taxes.
Industry therefore wants urgent implementation of these taxes. "The Goods and Services Tax, a game-changer to make India a common market will hopefully be concluded during the year. This would make the Indian economy more competitive by streamlining the domestic supply chains. We also expect that the Direct Taxes Code would be finalised in 2013, and industry is optimistic that it would lower tax rates and curtail exemptions," said CII Director General, Chandrajit Banerjee.