Kelkar Tax Proposals Supported By Indian Business Group

by Lorys Charalambous, Tax-News.com, Cyprus

27 July 2004

The Federation of Indian Chambers of Commerce and Industry (Ficci) has welcomed the fiscal reform proposals contained in the report of the Kelkar Task Force on the introduction of a goods and services tax which it says will help provide India with a world class tax system.

“The introduction of the Goods and Service Tax (GST), at both the central and state levels, is especially welcome as it will radically simplify the entire tax structure in the country,” Ficci observed in a statement.

“This will ensure the abolition of all taxes such as octroi, central sales tax, state level sales tax, entry tax, stamp duty, telecom license fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods & services and eliminate the cascading effects of multiple layers of taxation. This will mean the benefits of fiscal reforms are both comprehensive and fully effective,” the federation added.

The Kelkar Task Force report has suggested a fundamental restructuring of India’s public finance by proposing a medium term budgetary process instead of the annual budgetary process followed currently.

Ficci noted that the states, many of which have been hostile to the proposal of the GST, would ultimately be better off in revenue terms after the reforms by the equivalent of 1% of gross domestic product.

The federation was also in broad agreement with the report’s proposal for a cut in corporate tax to 30% alongside a phasing out of certain exemptions, although stating that it would prefer to see corporate tax cut to 25% in line with the ASEAN average (Association of South East Asion Nations).

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