There is a broad consensus on five principles of a good tax system, among
economists and the policymakers :
Need of VAT in India :
After implementing the state VAT, the Gol wanted to go for the proposed GST (Goods and Services Tax). This is aimed at integrating the indirect taxes of Centre and states into a single national tax—popularly known as the Single VAT of India. By creating a single market at the pan-India basis it will help the business and industry in a big way. The tax has potential to increase GDP up to 2%.
Implementation Process :
Collection Performance :
Inducing Voluntary Compliance : To enhance voluntary compliance, Government took several behavioural initiatives (based on taxpayer's behaviour) in recent times, incorporating factors such as — deterrence; developing social and personal norms; reducing complexity; and enhancing fairness; and trust.
GST & Understanding of Economy :
This is a direct tax and applies on the sales of all 'assets' if a profit (gain) has been made by the owner of the asset—a tax on the 'gains' one gets by selling assets.
The joint stock companies (more popular as 'companies' and 'corporate' sector in India) pay a direct tax known as corporate income tax (popular as 'corporate tax') on their annual profits. The existing rates used to be 30% for the domestic and 35 per cent for the foreign companies, operating in the country.
Logic behind the reform : In recent times, the corporate tax was cut by many countries across the world to attract investment and create jobs. India's move was an immediate response to rate cuts initiated by Asian developing countries, which compete with India in the global export markets. After the reform move, the corporate tax rate in India (for new manufacturing companies in particular), is lower than most of the ASEAN countries.
TAX EXPENDITURE
COLLECTION RATE
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