This can be achieved by:
Moderating the indirect tax rates on manufactured goods to make these products affordable to a larger section, thereby increasing industrial growth.
Widening the tax base to increase tax-GDP ratio so that more investments can be made in physical infrastructure and social sectors.
Simplifying the tax structure and procedures to encourage voluntary tax compliance.
Introducing a value added tax (VAT) to make India a common market. The tax rates should be uniform in all states.
Designing the custom duty structure to support industrial growth.The custom duty rates on raw materials and intermediates should be reduced to 10 per cent and that on final products to 20 per cent. This will encourage value addition in the country leading to higher employment opportunities.
Simplifying procedural transaction cost, of which some of the important simplification could be expeditious clearance of import and export cargo by providing a green channel facility to established importers and exporters, and filing of consolidated single excise return at one location by manufacturing organisations rather than multiple returns by each factory.
Our recommendations to the finance minister were predicated on the fact that the moderation of income tax rate in the past has improved tax compliance with consequent higher revenue collection, not only in absolute amount but also as a percentage of GDP. We recommended that:
The rate of corporate tax be brought down to 30 per cent from 35 per cent and the 5 per cent surcharge be withdrawn
On personal taxation, the basic exemption limit be raised to Rs 1,00,000 and the surcharge levied on individuals, Hindu undivided family, AOP, BOI with income more than Rs 8.5 lakh be withdrawn.
Credit of minimum alternative tax (MAT) be restored and be allowed for setting off against taxable income later on.
Dividend distribution tax be abolished to avoid double taxation of corporate profit.
Global corporations be encouraged to make India the hub of their activities by establishing their operating headquarter (ORHQ) the income of an ORHQ must be taxed at the concessional rate for a specified period.
Exemption be provided from MAT and dividend distribution tax for infrastructure companies.
Broad-basing of the Central Board of Direct Taxes be carried out by inclusion of representatives of trade, industry and professions.
Uniform rebate rate under Section 88 be allowed irrespective of gross total income of the assessee.