The Tax Administration Reform Commission (TARC) set up by the Finance Ministry to suggest measures to prevent economic offences among other things, will soon look into amalgamation of Direct Tax and Indirect Tax Departments.
“In business practices, companies pay corporate income tax, companies also pay Value Added Tax (VAT) or GST. If we amalgamate Direct Tax and Indirect Tax Departments, it would be so much easier for companies to file returns and so on. We, in commission (TARC) are going to look into the issue,” TARC Chairman and Advisor to Finance Minister Parthasarathi Shome said on Wednesday at an event organised by industry body ASSOCHAM.
Citing a survey by Paris-based think tank OECD, Dr. Shome added, “Among 60 per cent of countries that were surveyed by OECD, a vast majority of countries have already amalgamated the two departments (Direct Tax and Indirect Tax Departments).”
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He said the Commission is also looking into the issue - whether the judicial powers given to the Assessing Officer should be reviewed.
“We are discussing whether it is an optimal level (AO),” Dr. Shome said.
The TARC, mandated with job of reforming the entire gamut of tax administration, is likely submit its first report by May end.
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The TARC was given the tenure of 18 months time to give its final report which will go to the next government for follow up action.
Dr. Shome also said tax rates should not be too progressive because that would kill the incentive to save and invest.
However, he asserted that the personal tax rates in India, measured in purchasing power parity are among the lowest in the world.
Dr. Shome also said policy direction has been towards bringing more number of people in tax net which is about 3.6 crore at present.
“We can go up to 5 crore that will enable tax rationalisation and tax rate can also come down,” Dr. Shome said.