DARE - Because Entrepreneurs Do

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has called for advancing introduction of single Goods and Service Tax (GST) to April 2009 instead of 2010 to give a powerful stimulus to economy in context of continuing downturn, loss of jobs and India sliding to a lower rank in global industrial competitiveness.

Supporting the idea floated by economist Dr. Vijay Kelkar, the ASSOCHAM suggested that a single GST that would reduce total incidence of various goods and services taxes from high level of 30% now to about half of it to enthuse investors and industries to plan for rising production.

The Government is stated to be considering separate cuts in customs duties and service tax to provide stimulus to economy at another level as it has already exhausted scope for bail out and investment from its own resources.  There is in fact concern at the huge rise in total deficit of the centre and states budget to over 13% of the GDP.  The Finance Minister himself had hinted at the limits having been reached in his budget speech on February 16.

Though the earlier proposal was for GST to be introduced from  April 2010. In view of the present economic situation, advancing it by one year would be greatly desirable.  More particularly, it would simplify the books that business  and industry have to keep and improve compliance level.  It would also act as a powerful stimulus to revival of demand, the lack of which is one of the constraints on the economy now.

It is unlikely to encounter any opposition from the political parties as such a tax structure would be consumer friendly across the board as well as generally helpful to business.  The ASSOCHAM recalled the detailed study it had made on GST introduction in 2007 that had strongly recommended its early introduction.

The Chamber has pointed out that already a consensus exists among governmental authorities on benefits of GST and in sharing proceeds between centre, states and local bodies.  Dr. Kelkar has proposed a 4:4:2 ratio for sharing.  This could be a starting point with the final ratio and other structure to be decided after the new government is installed after the general elections in May.

Among many expected benefits of a single, low GST throughout the country would be the evolution of a common market, end to a unhealthy competition among states to induce industry in its area through competitive tax reduction and reduced harassment to business, especially medium and small units.

The revenue to government is more likely to go up through better compliance and greater incentive to those units that are outside such taxes to fall in line rather than seek to avoid taxes.

The ASSOCHAM would like to endorse the likely benefit of a GST now that a administrator Dr. Kelkar has revealed that the economic value of this reform would be US$ 500 billion.  According to him, this could also create some four to five million jobs.  This at a time when there is widespread concern that already 5 lakh jobs have been lost here and more likely due to the economical downturn globally.  The ASSOCHAM, therefore, strongly urge Finance Minister to take the plunge now as a bold measure to make a difference to the economic situation and announce the GST during the current budget session of Parliament.

Source: ASSOCHAM

Comments (0)

Subscribe to this comment's feed