Panel seeks end of ‘exemptions raj’ with GST

NEW DELHI: The country loses 2.7% of gross domestic product (GDP) because of numerous exemptions, a government appointed panel has said, while calling for cleaning up the tax system and stamping out the “exemptions raj.”

“According to the government’s own figures, excise tax exemptions (and taxing goods at low rates) result in foregone revenues of Rs 1.8 lakh crore or nearly 80% of actual collections. Tentative estimates by the committee suggest that the comparable figure for the states is about Rs. 1.5 lakh crore,” said the panel headed by chief economic adviser Arvind Subramanian.

The panel was set up by the government to suggest rates for the Goods and Services Tax (GST), which the government hopes to implement by April, 2016, but the disruption of Parliament has cast doubts about the progress of the Constitution Amendment bill to implement GST.

 Experts doubt whether the most ambitious tax reform since independence would be able to meet the roll-out deadline of April, 2016. “Given the historic opportunity afforded by the GST, the aim should be to clean up an Indian tax system that has effectively become an “exemptions raj” with serious consequences for revenues but also governance,” the panel said in its report, which was submitted to FM Arun Jaitley.
Stating that Indian tax policy is effectively penalising domestic manufacturing, it called for enacting an exemptions-free GST.


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