An indirect approach to fatten tax mop-up
While sparing the the common man any additional blushes on account of hikes in the prices of goods and services, finance minister P Chidambaram — through his indirect tax proposals — has sought to put the onus of higher tax collection on those who have the wherewithal to pay more.
While the FM has left the peak rate of basic customs duty of 10% and the normal rate of service tax and excise duty of 12% unchanged, he has tinkered with excise and customs duties in certain product categories within that range, with the prime objective of incentivising the manufacturing sector and expanding the tax base. The proposals will help the government increase its indirect tax collection by R4,700 crore in 2013-14.
The rationale behind keeping excise and service tax rates unchanged is that Chidambaram wants a convergence of both taxes, which is possible only when a composite goods and services tax (GST) is implemented. Presenting the Budget proposals, the finance minister expressed the hope that a consensus with states on GST will be forged within a few months.
“I propose to take the first decisive step by setting apart, in the Budget, a sum of R9,000 crore towards the first instalment of balance of central sales tax (CST) compensation,” said Chidambaram.
Recently, the Centre and states resolved the contentious issue of CST compensation, with states agreeing to a lower payment of R34,000 crore for phasing out CST, a precondition for the rollout of GST. CST, a tax imposed on inter-state movement of goods,
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