|
President’s Message |
|
INAUGURAL SESSION SPEECH On 13-12-2008 at Two Day National Tax Conference at Kolkata Hon’ble The Chief Guest, Hon’ble Mr. Justice Chittatosh Mukherji, The Chairman of the Conference, Shri R. D. Sharma, Office Bearers of the A.I.F.T.P. Zone, Past Presidents Shri N.M. Ranka, Senior Advocate, Shri V. Ramachandran, Senior Advocate, Shri P.C. Joshi, Dr. K. Shivaram, Shri M.L. Patodi, Deputy Chairman, Secretary General Shri Mukul Gupta, National Vice-Presidents Shri S.K. Poddar, Shri S.R Wadhwa, Shri J.K. Ranka, Shri Narayan Jain and other Office Bearers. It is a matter of great honour for me to be associated with National Tax Conference, 2008, which has been organized by All India Federation of Tax Practitioners, Eastern Zone at Kolkata jointly with Direct Tax Professional Associations and Commercial Taxes Practitioners Association, West Bengal. The purpose of the Conference is to discuss the burning issues under various taxation laws. In the era of globalization and e-technology, entire world has become a global village and we have to get ourselves fully equipped with the latest development in each field of taxation. The theme of the Conference “Simpler Tax Regime for Better Tax Compliance” is very important. This theme has reminded me the “National Tax Conference – 2000” which was held on 23-12-2000 at B.M. Birla Auditorium, Jaipur when the Chief Guest of the Conference was His Excellency, the Governor of Rajasthan who has emphasized for simplified tax laws. He said, I quote: “There is an urgent need to completely re-write the Tax laws with the confidence in the fairness of the assessee, as it’s the major part. They have to be re-written for bringing about simplicity, clarity and to make procedures and implementation more and more transparent and hassle-free.” I unquote. More than 8 years have passed from the aforesaid Conference of Jaipur, the simplicity of the provisions of tax laws which was expected are yet to achieve. With introduction of VAT and promise of implementation of Goods and Service Tax from 1-4-2010 we were quite sure that tax laws shall be simpler. However, the scene is quite contrary in different States. Conference at Kolkata has assumed great importance since Kolkata has taken lead in the Empowered Committee which was constituted for introduction of VAT in the country. Sales Tax which is a State subject derived from Entry-54 of the State List (List II of VII Schedule of the Constitution) for which the States are sovereign in taking decisions, have taken different decision contrary to White Paper. The Empowered Committee of
State Finance Ministers constituted by Ministry of Finance, Government of India,
on the basis of the resolution adopted in the Conference of the Chief Ministers
published a White Paper on State Level Value Added Tax on 17-1-2005. It was clearly mentioned in the White Paper that with the introduction of VAT, other taxes such as turnover tax, surcharge, additional surcharge etc. will be abolished as mentioned in para 1.1 of the said White Paper and therefore, transparency will increase. VAT was introduced for Simplified Tax Regime by abolition of declaration form etc. as mentioned in para 2.14 of the White Paper. We are conscious of the fact that since the States have their absolute power to enact the provisions of the VAT Act, different States had made different provisions under the respective Value Added Tax, which has not simplified the provisions of imposition of tax on goods. In para 2.16 of the White Paper it has been mentioned, I quote:
Almost all the States in country have introduced Entry Tax even after publication of White Paper. It was specifically agreed that after the introduction of VAT, Entry Tax as well as additional tax, surcharge etc. shall be abolished; but, instead of abolishing the same to have a Simpler Tax Regime, the State of U.P. has re-enacted Entry Tax on 24-9-2007 since earlier Entry Tax was declared invalid and void. The goods which are subjected to entry tax are also liable for VAT and this entry tax has not been made vatable except in the case of paper that too if manufactured in U.P. which is a clear violation of Article 304 (a) of the Constitution of India. Neither other taxes have been abolished nor the same has been made vatable. On the other hand, special additional tax have been levied recently w.e.f. October, 2008 in the State of U.P. If this is the position with regard to VAT which was to be introduced in compliance of the decision of the Empowered Committee of the State Finance Minister in accordance with White Paper, I am very doubtful as to what shall happen to G.S.T. which the Hon’ble Finance Minister of the Central Government has announced to be introduced w.e.f. 1-4-2010. Simpler Tax Regime is the need of the hour for which the parties in power in different States have to work unitedly for betterment of the development of the country. What has been done by the Empowered Committee of the State Finance Minister is now required to be done by the consensus of the State Govt. in accordance with Article 249 of the Constitution of India by adopting the procedure of not less than 2/3rd of the members present and of voting by passing a resolution that it is necessary in the national interest that the Parliament should make laws with respect to the matters enumerated in the said list specified in the said resolution. Unless such a step is taken by the State Legislatures under Article 249, empowering the Parliament to make laws and it shall be very difficult to have simpler G.S.T. even w.e.f. 1-4-2010. We have various tax laws both on direct and indirect taxes whether it is Sales Tax, VAT Act and Central Excise Act, Income-tax Act, Wealth Tax Act etc. Income-tax Act, 1992 was continuing since long which had seen 29 amendments from 1939 to 1956 in pursuance of the recommendations of the “Taxation Enquiry Commission” under the Chairmanship of Dr. John Mathai. The Income-tax Act was thereafter referred to the Laws Commission and a draft Bill was submitted in 1958. The Law Commission took almost 2 years to deliberate on and recommend a comprehensive law on Income Tax. Two areas which concerned the Government were (i) rationalization of the law to prevent inconvenience to assesses and (ii) prevention of evasion of income tax. Direct Tax Enquiry Committee, popularly known as Thyagi Committee considered both the angles and submitted a detailed report in 1959 resulting in the Income-tax Act, 1961 which holds the field today, though substantially changed by frequent amendments from 1961 till now of more than 3000. Tax Laws was sought to be simplified when White Paper was published in 1986 declaring a long-term fiscal policy. Some of the Committees which deserve mention in the shaping of the Tax Law are (i) Boothalingam Committee Report, (ii) wanchoo Committee Report, (iii) Raja Chelliah Committee Report, among others. The system has undergone a change for the better. It is needless, hence, to say that if the system has to continue to be proactive it necessarily calls for total co-operation on the part of the tax-payer and a voluntary compliance. The stress now is on tax-payer compliance and reducing the administrative discretion to the minimum. Based on the recommendations made by Chelliah Committee on Tax, Service Tax was introduced in Finance Act, 1994. Even though the maximum revenue is received from the Service Tax but even after expiry of more than 14 years, there is no such enactment by a separate Act for Service Tax. The definition of section 65(105) has gone from (a) to (zzzz) just like section 80 of I.T. Act. The alphabets are only a to z but instead of making provisions simplified, even Definitions provisions are making various sub-clauses which are difficult to remember. This is what has happened under VAT Act also. Today we are facing a global financial crisis. In the background of U.S. financial crisis a chain reaction has taken place throughout the world. Since the collapse of Lehman Brothers, the advanced countries have introduced a comprehensive package of financial measures to deal with the crisis. In an article of Shri Sudipto Mundle an Economist of our country it has been mentioned, I quote : “Fortunately, direct Indian exposure to the US crisis has been limited. Indirectly, Indian stock prices have been affected by foreign institutional investors’ (FILs’) withdrawals : FILs invested well over Rs. ten lakhs crore beteen January, 2006 and January 2008, driving the Sensex first past the 10,000 milestone, and then 20,000 over the period. But from January to mid-October this year, FILs pulled out over Rs. 50,000 crore, partly as a flight to safety and partly to meet their redemption obligations at home. These withdrawals drove the Sensex down from over 20,000 to less than 10,000 in only nine months. The Reserve Bank of India (RBI) reacted swiftly to restore liquidity and calm the markets. It reduced the Cash Reserve Ratio (CRR) by 2.5 percentage points in two steps, created a special Rs. 20,000 crore window for bank lending to mutual funds, and provided another Rs. 25,000 crore as part reimbursement for farm loan waivers. These measures generated extra liquidity of Rs. 1,45,000 Crore. But on account of it the growth will certainly be affected, and could fall from 7 per cent or more this year to 6 per cent next year, reflecting the full-year impact of the crisis. Such growth rates of 6-7 per cent are high by developing country standards, and beyond the reach of advanced countries even at the best of times. India is only facing a growth deceleration and not a recession.” However, our Hon’ble Prime Minister has announced a number of financial packages for assistance of the trade, industry including banking industries which will definitely provide a strong base for the sustained growth. In the context of global financial crisis it is absolutely essential that the Government should also frame its financial policies keeping in view the future growth, in accordance with the requirement of the day for which the tax professionals can also give substantial contribution with their useful suggestions. It is a time when special
attention is required to be given for simpler Tax Regime which will definitely
ensure the better tax compliance. With these words, I convey my best wishes for the success of the Conference. Jai Hind. Bharat Ji Agrawal |