The Hindu Business Line : Introduction of goods and services tax — India Inc welcomes Kelkar panel proposal

THE chambers have welcomed the Kelkar Task Force Report's recommendations on introducing the goods and services tax (GST) as it would simplify the tax structure.

However, there are some concerns on the proposal to do away with tax exemptions for infrastructure projects.

Integration of goods and services taxation would "provide India a world class tax system even while improving tax collections and ending the long standing distortions of differential treatments of manufacturing and service sector," said a Federation of Indian Chambers of Commerce and Industry (FICCI) statement.

This will ensure the abolition of taxes such as octroi, Central sales tax, State level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, and eliminate the cascading effects of multiple layers of taxation, it added.

The proposal of a medium term budgetary process instead of the present annual budgetary process "will provide a stable fiscal framework and budgeting will then become a seamless continuous process rather than discrete annual exercises," said FICCI.

According to the Associated Chambers of Commerce and Industry of India (Assocham) President, Mr Mahendra K. Sanghi, introduction of GST would significantly reduce the overall tax burden and would bring down the "cost of compliance." All these proposed recommendations will lead to improved intra-state trade, which will benefit the common market agenda, it added. But Assocham "cautioned" on how the Government would intend to encourage investment in infrastructure, if the concerned tax exemptions are done away with.

According to the PHD Chamber of Commerce and Industry (PHDCCI), exemptions "should be phased out in a manner that the impact on the sector could be minimised and effective tax burden does not go up." India has not reached at a stage where we should do away with the exemptions relating to Section 80L and Standard Deduction, it added.

Welcoming the proposed cut on the central value added tax (CENVAT) rate, PHDCCI said that the new tax structure prescribed by the Committee would reduce the burden on manufacturing industry from the existing high of 35 per cent to 20 per cent. The chamber feels that the long-term objective should be to bring down this burden to 15 per cent.

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