There was a need to look again at the provisions of the proposed direct taxes code (DTC) and the goods and services tax (GST), said Parthasarathi Shome, director and chief executive, Indian Council for Research on International Economic Relations.

There should be fresh consultation over DTC and the structure of GST was not being put together in an ideal way, he said. “Construction of GST is not happening the way it should. We should have a GST that makes sense, and (where) goods and services are treated equally.” 

GST and DTC are expected to be implemented by April 2013. The two tax reforms have already missed April 2011 and April 2012 deadlines.

Shome, who also heads an expert committee set up by the Prime Minister to address foreign investor concerns on the much-dreaded General Anti-Avoidance Rules (GAAR), made these comments at an interactive session organised by the Merchants’ Chamber of Commerce.

The tax expert, while calling for a fresh round of consultation on the DTC draft, said it has to be done speedily to meet the April 2013 deadline.

The DTC Bill, 2010, integrates direct tax laws and seeks to replace the Income-Tax Act, 1961, and the Wealth Tax Act, 1957. GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level. Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain.

The need for a fresh look at DTC was brought up by Finance Minister P Chidambaram, too, recently.

On GST, Shome said around 60 per cent of the tax base was left out as three major items — petroleum, alcohol and tobacco — have been excluded from the tax form.

To avoid double inter-state taxation and tax evasion, he said, it was important to have an advanced software and clearing system for computerisation of inter-state trade, which could be best done by a bank.

There ought to be a differential pricing mechanism for LPG cylinders and electricity, said Shome. He also said it was important to bring down corporate tax rate to make India more attractive as an investment destination.

The Icrier chief said implementing entry tax was not the best way to raise revenues. Recently, West Bengal introduced entry tax on goods.

“Introduction of entry tax is unnecessary. There are so many ways to raise revenue,” added Shome. (Business Standard)