FM Wants New Tax Regime Which is Simple and Broad Based Leading to Lowering of Tax Rates, Better Tax Compliance and Reduced Litigation: Looking forward to Constructive Suggestions from Empowered Committee of State FMS on GST to set-up an Innovative & Cooperative Fiscal Federalism – Dated:- 22-7-2010 – Union Finance Minister, Shri Pranab Mukherjee said that the Government wants to present the stakeholders with a taxation regime which is simple and broad-based leading to lowering of tax rates, better tax compliance and reduced litigation. Shri Mukherjee further said that the new Direct Tax Code will take into account established and time test practices which have withstood judicial scrutiny. Regarding reforms in indirect taxes, Shri Mukherjee said that we are able to develop convergence on many contentious issues relating to GST during his meeting with Empowered Committee of State Finance Ministers yesterday. Shri Mukherjee was addressing the Special Session on the occasion of the meetin
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he legislation for DTC and seriously engaged to develop consensus to bring all the States on board to roll-out GST from 1st April, 2011. The full text of the speech of the Finance Minister, Shri Pranab Mukherjee delivered on the occasion of the meeting of the National Executive Committee of FICCI on the Topic: Agenda for the Nation: The Tax Reforms- GST and DTC is given below: It gives me great pleasure to address this session of the National Executive Committee of FICCI and have the opportunity to interact with the distinguished gathering of people working in different sectors of the economy. At the very outset, I would like to complement FICCI in its efforts to work closely with the Government on diverse policy issues and for providing a platform like this for public debate on key issues relating to the Indian economy and the business environment. Such deliberations play an important role in generating public opinion, building consensus and crystallising policy inputs and help us in
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em or have unsustainable fiscal deficit. As per the IMF's latest economic review, the world economy expanded at an annualized rate of over 5 percent during the first quarter of 2010. This has been mostly due to robust growth in Asia. There are encouraging signs of growth in private demand. Industrial production and trade posted double-digit growth, and consumer confidence continues to improve. Overall, macro-economic developments confirm expectations of a modest, but steady recovery in most advanced economies and strong growth in many emerging and developing economies. World growth is projected at about 4½ percent in 2010. Significantly India's growth in 2010 has been projected at 9.4 % by the IMF. The projection for India's economic growth is much higher than our estimated projection of about 8.5 % in the financial year. The growth over and above 8.5% would depend upon growth rate of our services sector. As per the latest GDP data services sector registered an avera
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s like pulses and milk have been contributing significantly towards food inflation and all efforts are being made to increase the availability of these items and the government has already put in place long term strategy to increase the production of the items for which demand is consistently increasing with the rise in the income level in general. In view of the recovery during 2009-10, this year in my budget for 2010-11, I initiated a partial roll back of stimulus measures and a resumption of the fiscal consolidation process by pegging fiscal deficit at 5.5 per cent of GDP. The Medium Term Fiscal Policy Statement 2010-11 has provided the roadmap with fiscal deficit declining to 4.8 per cent of GDP in 2011-12 and further to 4.1 per cent of GDP in 2012-13. So far we are on target and our revenue and expenditures streams are flowing as planned. Revenue realization so far has been satisfactory. DIRECT TAX CODE We have initiated the reforms in the Direct Taxes and as per our commitment; w
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nd their representatives for their active participation in shaping this historic legislation which will make Indian trade and industry globally competitive. GST We have also initiated the reforms in Indirect Taxes. We have worked with great perseverance in coordination with Empowered Committee of State Finance Ministers over the last 3-4 years to clear the way for the launch of this reform in the realm of indirect taxes. Given the size and complexity of our economy and our deep commitment to the values of pluralism, federalism and democracy I would say that this dialogue has moved at a satisfactory pace. Yesterday, I met Empowered Committee of State Finance Ministers and we were able to develop convergence on many contentious issues. A Draft Constitutional Amendment has been prepared and shared with the Empowered Committee of State Finance Ministers. We are looking forward to constructive suggestion from Empowered Committee on this landmark legislation, which will change the existing l
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nique Projects (TAGUP) headed by Shri Nandan Nilekani, Chairman, Unique Identification Authority of India has proposed a detailed roadmap and strategy for putting in place the requisite IT Infrastructure to handle work related to GST. Since this infrastructure needs to be in place well before the actual introduction of GST in April next year, we have constituted an empowered Group chaired by Dr. Nilekani with joint representation from the Centre and the States which would be authorized to take decisions about necessary IT parameters. This would help us in freezing one of the critical elements for successful role out of GST from 1st April 2011. On exemptions, we have proposed to review the existing exemptions from Central Excise duty so that the list of goods exempt from CGST is aligned to the SGST list and 99 items currently exempt from VAT are exempt from both components of GST. As for the rate structure, it has been the Centre's considered view that the full potential of GST coul
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d industry. Eventually, it will settle down to a level of 16 to 18% for both CGST and SGST which will mean an effective rate of 12%. In the second year the standard rate for SGST and CGST may be reduced to 9% retaining the lower rate at 6%. During the third year the standard rate may be reduced to 8% and lower rate increased to 8% and services retained at 8% both for CGST and SGST. Thus, in a phased manner, we will be able to achieve a single CGST and SGST rate for both goods and services. GST would provide a level playing field to domestic producers and has a potential of providing inbuilt stimulus to the economy by removing tax distortions and tax competitions. It has been estimated by NCAER that implementation of well designed GST will see an increase of 2 – 2.5% in India's GDP. Exports could increase by well over 10%. The expected net present value of GST gain exceeds half a trillion dollars. The gain from GST will propel India from one trillion dollar economy to two trillion d
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od and Right to Employment are not merely promises but the legal entitlements of the citizens and to fulfill these commitments, we need revenue. I am confident that the Tax Reforms in both Direct Taxes and Indirect Taxes will provide revenue buoyancy to meet our social sector expenditure. Our younger generation can look forward to an India which is free from poverty and illiteracy. I can see that today's Executive Body meeting is being attended by heads of MNCs, financial institutions, banks and economists and hope your inputs during the deliberations would lead to new insights. I am happy that FICCI has chosen this topic:- Agenda for the Nation: The Tax Reforms-GST and DTC. There cannot be more appropriate time than this, when the Government is in process of finalizing the legislation for DTC and also seriously engaged to develop consensus to bring all the States on board to role out GST from 1st April 2011. We have always valued the inputs from our stakeholders, whom we consider
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