Outline the Direct & Indirect Tax Reforms in India in recent times.
The tax reforms in India began with the Chelliah Committee recommendations and later on, government appointed the Vijay Kelkar Committee in 2002 which further provided direction to the tax reforms in the country.
Direct Tax Reforms
- PAN (Permanent Account Number) should be expanded and it should cover all citizens.
- To clear the backlog, the department should outsource the data entry work.
- All returns and issue of refunds should be completed in a four month period.
- Establishment of a Tax Information Network to modernize, simplify and rationalize tax collection, particular TDS and TCS.
- Rationalize income tax slabs, eliminate surcharge on personal income tax.
- Increase in exemption limit to Rs.1 lakh for the general categories of taxpayers and further exemption for senior citizens and widows.
- Reduce the Corporate tax to 30% for domestic companies and 35% for foreign companies.
- Abolition of wealth tax
- Establishing electronic Return Acceptance and Consolidation System (ERACS) which act as an interface between taxpayer and collector
- Establishing of e-TDS & e-TCS which means tax deduction at source and tax collection at source. It is mandatory to file TDS returns electronically for the operators, the Government as well as corporate sector
Indirect Tax Reforms
- Reduction in Custom Duties
- Central Excise was replaced with MODVAT and now CENVAT
- Service tax was first introduced on some limited services in 1994-95 at 7%
- Replacement of almost all indirect taxes with single Goods and Services Tax (246 words)