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Parthasarathi Shome in Calcutta on Thursday. Picture by Kishor Roy Chowdhury
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Calcutta, Oct. 11: A review of the government’s two key reform proposals — the direct tax code (DTC) and the goods and service tax (GST) — is necessary prior to their implementation, Parthasarathi Shome, who heads the panel on GAAR, said here today.
“GST and DTC are very much needed. But they need more consultation,” Shome said today at an industry event.
If Shome’s observations are taken into consideration, the government is likely to miss the April 2013 deadline for implementing these key reforms.
On GST, Shome said that its ambit could be expanded to include petroleum, tobacco and alcoholic products. “GST should make more international sense. Three major components — petroleum, tobacco and alcoholic products — that are outside could be included in the GST base. If they are left out, this reduces the probable GST base from 100 to 40 per cent.”
He said the state governments feared losing out on revenue, but there was no point in “vitiating” the structure of GST.
Under GST, there would be a uniform rate of taxation across the country and the decision on fixing the rate will rest with the GST Council comprising all the states and the Centre. But the biggest roadblock for GST rollout is the lack of consensus between the Centre and the states. States fear losing their autonomy to tinker with the tax rate.
On DTC, which seeks to replace the Income Tax Act, 1961, Shome said the original bill mooted by P. Chidambaram, during his earlier stint as finance minister in the UPA, had undergone several changes. The most significant change was introduced by Pranab Mukherjee, when he was the finance minister, in the form of provisions relating to retrospective tax amendments and GAAR (General Anti-Avoidance Rules), which was enacted in the Finance Bill 2012.
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