Our Bureau

New Delhi, Nov 13

THE PHD Chamber of Commerce and Industry has asked the Government to initiate steps towards integration of the central Value-Added Tax with the State-level VAT. According to the chamber, a successful attempt towards a unified tax would have a positive impact on business and investment climate in the country.

In its pre-Budget memorandum submitted to the Ministry of Finance, the chamber said that multiplicity of taxes such as sales tax, VAT, excise, service tax and octroi prevented rapid industrial growth. Hence merging all taxes into a single VAT should be done at the earliest. The first step in this regard should be abolition of central sales tax from the coming financial year instead of over two years as indicated by the Government earlier.

The chamber said that imports should be brought under the VAT net to provide a level playing field to indigenous manufacturers.

It added that all the taxes combined together at present constituted around 40 per cent of the product price. Lowering tax rates would thus bring better compliance. The memorandum also calls for withdrawal of the Fringe Benefit Tax with immediate effect. "It is wrong to presume that all such expenses (which are under the ambit of FBT) incurred by employers are yielding some generous benefits to the employees," the chamber said.

PHDCCI also stated that there should be a 5 per cent gap between customs duties on finished goods and that on raw material components to help manufacturing competitiveness. The objective of customs duty should be to stimulate economic and industrial activity in the country, promote domestic value addition and give due protection to the domestic industry.

The chamber has called for a separate comprehensive stand-alone legislation for the service sector, along with distinct administrative machinery exclusively devoted to the collection of service tax.

(This article was published in the Business Line print edition dated November 14, 2005)
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