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TMI Blogfm wants new tax regime - simple and broad based leading to lowering of tax rates, better tax compliance and reduced litigationX X X X Extracts X X X X X X X X Extracts X X X X ..... fm wants new tax regime - simple and broad based leading to lowering of tax rates, better tax compliance and reduced litigation - News and Press Release Dated:- 23-7-2010 - News - PIB Press Release Dated 22-7-2010 Union Finance Minister, Shri Pranab Mukherjee said that the Government wants to present the stakeholders with a taxation regime which is simple and broad-based leading to lowering of tax rates, better tax compliance and reduced litigation. Shri Mukherjee further said that the new Direct Tax Code will take into account established and time test practices which have withstood judicial scrutiny. Regarding reforms in indirect taxes, Shri Mukherjee said that we are able to develop convergence on many contentious issues relating to GST during his meeting with Empowered Committee of State Finance Ministers yesterday. Shri Mukherjee was addressing the Special Session on the occasion of the meeting of the National Executive Committee of FICCI on the topic: Agenda for theNation: The Tax Reforms- GST and DTC,here today. The Finance Minister said that we are looking forward to constructive suggestions from Empowered Committee of State Finance Ministers on the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark legislation on GST which will change the existing landscape of existing taxation power of Centre and States. Shri Mukherjee further added that it will also set an innovative precedence for cooperative fiscal federalism. He said that since information technology infrastructure is a pre-requisite to harness the benefits of GST for consumers, industry and governments, a Tax Advisory Group for Unique Projects (TAGUP) headed by Shri Nandan Nilekani, Chairman, Unique Identification Authority of India has proposed a detailed roadmap and strategy for putting in place the requisite IT infrastructure before the actual introduction of GST in April next year. Shri Mukherjee said that the Government is in process of finalising the legislation for DTC and seriously engaged to develop consensus to bring all the States on board to roll-out GST from 1 st April, 2011. The full text of the speech of the Finance Minister, Shri Pranab Mukherjee delivered on the occasion of the meeting of the National Executive Committee of FICCI on the Topic: Agenda for the Nation: The Tax Reforms- GST and DTC is given below: "It gives me great pleasure to address this session of the National Executive C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee of FICCI and have the opportunity to interact with the distinguished gathering of people working in different sectors of the economy. At the very outset, I would like to complement FICCI in its efforts to work closely with the Government on diverse policy issues and for providing a platform like this for public debate on key issues relating to the Indian economy and the business environment. Such deliberations play an important role in generating public opinion, building consensus and crystallising policy inputs and help us in getting the feedback on policy initiatives. Let me begin with the global and domestic overview of economic situation and market fundamentals. We are in more comfortable situation at this point of time if we compare the international and domestic economic fundamentals with the previous Financial Year. Last year, most of the major economies were struggling to beat the phase of slowdown in the aftermath of US sub-prime crisis followed by global commodity price shock. World output decreased by - 0.6 per cent during 2009 as compared to 3 percent increase in 2008. Final domestic demand in advanced economies increased by mere 0.2 per cent in 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and declined by -2.5 per cent in 2009. We also suffered in terms of exports earnings. India's exports during 2009-10 in dollar terms registered a negative growth of -3.6% and imports also declined by -5.6%. By and large fundamentals of the major economies are looking up barring a few of the European economies which have either sovereign debt problem or have unsustainable fiscal deficit. As per the IMF's latest economic review, the world economy expanded at an annualized rate of over 5 percent during the first quarter of 2010. This has been mostly due to robust growth in Asia. There are encouraging signs of growth in private demand. Industrial production and trade posted double-digit growth, and consumer confidence continues to improve. Overall, macro-economic developments confirm expectations of a modest, but steady recovery in most advanced economies and strong growth in many emerging and developing economies. World growth is projected at about 4½ percent in 2010. Significantly India's growth in 2010 has been projected at 9.4 % by the IMF. The projection for India's economic growth is much higher than our estimated projection of about 8.5 % in the financial year. The growth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over and above 8.5% would depend upon growth rate of our services sector. As per the latest GDP data services sector registered an average growth rate of 7.4% during 2009-10. This sector contributes about 57% to our GDP and has to register double digit growth for significantly higher overall growth rate. With prediction of a good monsoon I expect economy in general and services sector in particular to do well. Our Industrial sector and external sector have shown an impressive recovery. I am concerned about the prevailing high inflation in the economy. Inflation erodes real income. It hurts the marginalized and the poor segment of our society the most. But, I am at the same time very optimistic that the inflation rate will come down to a moderate level of 5-6% in the coming months. The average inflation in June at 10.55% was marginally higher as compared to the inflation of 10.16% during May 2010 partly because of the fuel price hike. The inflation rate of some of essential items is moderating. As per the latest WPI indices released on 3 rd June, cereals inflation is now about 6% compared to previous year's 12%. Items like pulses and milk have been contributing significantly to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards food inflation and all efforts are being made to increase the availability of these items and the government has already put in place long term strategy to increase the production of the items for which demand is consistently increasing with the rise in the income level in general. In view of the recovery during 2009-10, this year in my budget for 2010-11, I initiated a partial roll back of stimulus measures and a resumption of the fiscal consolidation process by pegging fiscal deficit at 5.5 per cent of GDP. The Medium Term Fiscal Policy Statement 2010-11 has provided the roadmap with fiscal deficit declining to 4.8 per cent of GDP in 2011-12 and further to 4.1 per cent of GDP in 2012-13. So far we are on target and our revenue and expenditures streams are flowing as planned. Revenue realization so far has been satisfactory. DIRECT TAX CODE We have initiated the reforms in the Direct Taxes and as per our commitment; we placed the Draft Direct Tax Code as well as revised discussion paper in the public domain. In the revised discussion paper, we have addressed the areas of concern raised by trade and industry. In the Draft Direct Tax Code, it has been our endeavou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to incorporate the best global practices and to use innovative methods for attaining equity-vertical and horizontal, ensure growth with sustainability, create stable fiscal eco-system and have well regulated free markets. The new Direct Tax Code will also take into account established and time tested practices which have withstood judicial scrutiny. We want to present the stakeholders with a taxation regime which is simple and broad based leading to lowering of tax rates, better tax compliance and reduced litigation. The draft DTC after taking into account the suggestion on revised discussion paper is under legislative drafting. I intend to introduce draft DTC in monsoon session of parliament. I would like to thank the trade and industry and their representatives for their active participation in shaping this historic legislation which will make Indian trade and industry globally competitive. GST We have also initiated the reforms in Indirect Taxes. We have worked with great perseverance in coordination with Empowered Committee of State Finance Ministers over the last 3-4 years to clear the way for the launch of this reform in the realm of indirect taxes. Given the size an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d complexity of our economy and our deep commitment to the values of pluralism, federalism and democracy I would say that this dialogue has moved at a satisfactory pace. Yesterday, I met Empowered Committee of State Finance Ministers and we were able to develop convergence on many contentious issues. A Draft Constitutional Amendment has been prepared and shared with the Empowered Committee of State Finance Ministers. We are looking forward to constructive suggestion from Empowered Committee on this landmark legislation, which will change the existing landscape of existing taxation power of Centre and State and will also set an innovative precedence for cooperative fiscal federalism. I would like to share with you some of the proposals, which we have made to Empowered Committee. On the issue of exemption threshold under GST, we have proposed that the exemption threshold for both goods and services under both components of GST i.e. CGST and SGST should be uniform at Rs. 10 lakh . For the same reason, the threshold for compounding for small dealers should also be uniform under CGST and SGST whether it is fixed at Rs. 50 lakh of turnover per annum or Rs. 1 crore per annum. Of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse, we must not lose sight of one of the critical deliverables of GST viz. that it should result in considerable simplification for small dealers so that compliance is easy and assured. The Information Technology infrastructure is a pre requisite to harness the benefits of GST for consumer, industry and governments. For this, Tax Advisory Group for Unique Projects (TAGUP) headed by Shri Nandan Nilekani, Chairman, Unique Identification Authority of India has proposed a detailed roadmap and strategy for putting in place the requisite IT Infrastructure to handle work related to GST. Since this infrastructure needs to be in place well before the actual introduction of GST in April next year, we have constituted an empowered Group chaired by Dr. Nilekani with joint representation from the Centre and the States which would be authorized to take decisions about necessary IT parameters. This would help us in freezing one of the critical elements for successful role out of GST from 1 st April 2011. On exemptions, we have proposed to review the existing exemptions from Central Excise duty so that the list of goods exempt from CGST is aligned to the SGST list and 99 items currently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt from VAT are exempt from both components of GST. As for the rate structure, it has been the Centre's considered view that the full potential of GST could be realized only if we adopt a single rate structure with unification of the rate for goods and services. However, we recognize that this may not be feasible on the date of introduction of GST and requires a phased approach so that the transition is smooth and painless both for the taxpayer and the administration. As such, we are agreeable to the adoption of a dual rate structure for goods at the inception of GST. In the year of introduction i.e. 1 st April, 2011, the Central Government has proposed to keep CGST lower rate for goods at 6% and standard rate at 10%. The services will be charged at 8%. Our request to the States will be to consider keeping the same rates i.e. the lower rate for SGST at 6%, standard rate at 10% and services at 8%. This mutually supportive approach will ensure that we have a single rate for CGST and SGST in the range of 12 to 20% in the first year of GST introduction. The peak effective rate will be about 15% which should be quite acceptable to the trade and industry. Eventually, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will settle down to a level of 16 to 18% for both CGST and SGST which will mean an effective rate of 12%. In the second year the standard rate for SGST and CGST may be reduced to 9% retaining the lower rate at 6%. During the third year the standard rate may be reduced to 8% and lower rate increased to 8% and services retained at 8% both for CGST and SGST. Thus, in a phased manner, we will be able to achieve a single CGST and SGST rate for both goods and services. GST would provide a level playing field to domestic producers and has a potential of providing inbuilt stimulus to the economy by removing tax distortions and tax competitions. It has been estimated by NCAER that implementation of well designed GST will see an increase of 2 - 2.5% in India's GDP. Exports could increase by well over 10%. The expected net present value of GST gain exceeds half a trillion dollars . The gain from GST will propel India from one trillion dollar economy to two trillion dollar economy in a short span of time. Therefore, the successful implementation of GST would create win-win-win situations for centre-state, Industry and consumers. Finally let me reiterate that the UPA Government is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmitted for the inclusive growth and development. I have always viewed inclusive and equitable growth as the vehicle to the long term peace and prosperity of our country. The government would not cut budgetary provisions for key social sectors. Keeping in view the objective of inclusive development, budgetary allocation this year on social sector has been increased to Rs. 1,37,674 crore which is about 37 per cent of the total Plan outlay for the current financial year. To have inclusive growth and to address the core concern of the segments of the population, who are at the bottom of the pyramid, we need to have a transparent and stable taxation regime to generate revenue for our social expenditure. The commitment of the Government for Right to Education, Right to Food and Right to Employment are not merely promises but the legal entitlements of the citizens and to fulfill these commitments, we need revenue. I am confident that the Tax Reforms in both Direct Taxes and Indirect Taxes will provide revenue buoyancy to meet our social sector expenditure. Our younger generation can look forward to an India which is free from poverty and illiteracy. I can see that today's Executiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Body meeting is being attended by heads of MNCs, financial institutions, banks and economists and hope your inputs during the deliberations would lead to new insights. I am happy that FICCI has chosen this topic:- Agenda for the Nation: The Tax Reforms-GST and DTC. There cannot be more appropriate time than this, when the Government is in process of finalizing the legislation for DTC and also seriously engaged to develop consensus to bring all the States on board to role out GST from 1 st April 2011. We have always valued the inputs from our stakeholders, whom we consider our partners in reforms process and in developmental agenda. As usual I would look forward for your valuable inputs. I thank FICCI for giving me this opportunity. I wish all the best in your endeavors." - News - Press release - PIB Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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