Respected Finance Minister of India and all Finance Ministers of the respective States,

We all are aware that India is one of the BRIC (Brazil, Russia, India and China) countries. It is predicted by Goldman Sachs of USA that Indian economy could be 40 times bigger by 2050. To achieve this, India needs to implement many changes. India needs to improve its governance, control inflation, introduce credible fiscal policy and liberalise financial markets. These are some of the key issues that India needs to address, as per the report¹.

Introduction of State-level Value Added Tax (VAT) beginning from the year 2005 was the first step towards harmonising levy of tax on goods in different States of the Union of India. Though, the State level VAT has resulted in garnering higher revenue, much is still to be achieved in terms of simplicity and ease of compliance and tackling administrative issues. In fact, in these areas the position has worsened!

While, the State-level VAT system is yet to stabilise and get seasoned, the Centre and States are embarking upon introducing ‘dual’ Goods and Services Tax (GST), to be levied concurrently by both levels of government.

While we welcome in principle the above initiative of the Central and State Governments,

we have a few suggestions for your kind consideration:

1. Welcome for help taken of tax professionals in drafting VAT:

We welcome and appreciate the help taken from professionals for the first time in the history of working of government, while drafting State-level VAT.

It is common experience that at times there is quite a difference in the perception of a bureaucrat and that of a professional on a particular subject, due to their different level of exposure and expertise a given subject, and due to the difference in the basic style of functioning in the government and in the private sector.

2. Indian (local) professionals were overlooked

While the State governments were euphoric about designing and implementing VAT system, local (Indian) professionals were totally overlooked and professional help of only big foreign firms was sought.

3. Historical background of local (Indian) professionals’ Associations

You must be aware, Sir, of the contribution of local (Indian/State Level) Associations of Sales Tax Professionals in building up and in assisting in shaping the Sales Tax Laws of the States.

All the regional associations of tax-professionals of India have taken it as a social obligation towards the tax-payers at large, and as if being in the position of Government/Court officers, have always played a major and pro-active role in the smoothening of administration of the tax laws of the States. They have acted as a bridge between tax-payers and the Central Government/State Governments.

4. Helping in drafting of State-level VAT was not an exception

We would like to inform, Sir, that although the local associations were not formally appointed as consultant for drafting State-level VAT, their contribution towards the same has been substantial and cannot be lost sight of.

Taking a particular example of the State of Maharashtra, the Sales Tax Practitioners’ Association of Maharashtra had formed a ‘core committee’ to study the draft of VAT and had suggested various changes therein. Senior members who have spent their entire life in practising of sales tax law, had given benefit of their rich expertise to the Government, without the help of which some absurd provisions would have crept-in in the VAT system which ultimately would have resulted in chaos. And, this is a perpetual practice. A continuous study is carried out and suggestions are being made for the betterment of VAT system, regularly.

And, what is true for the State of Maharashtra is true for the rest of the States of India. Every association of sales tax professionals of respective State has played a vital role in making VAT system effective in the respective State.

5. Gratuitous Service

Needless to mention that all the local associations are giving these valuable services without charging any fees.

6. Local associations are equally globally networked

In the age of computers and internet these local associations are no longer in isolation and are equally networked with their counterparts which are spread across the world. Seminars, conferences and workshops are regularly held internationally wherein their views on given subjects are exchanged. Local associations regularly hold study tours abroad where foreign professionals give presentations and vice versa.

Sometime ago, Malaysian Government wanted to introduce provision of advance ruling in its Income-tax Act. The Malaysian Tax Bar Association sought help of our Association (STPAM) for a comparative study of Indian provisions for the same.

7. Acclimatisation of the system

Sir, you would agree that any plant or seed picked up from abroad without regard to its climatic condition from where it is brought in and planted on the Indian soil may not work, due to its entire different climatic conditions and may eventually die.

Similarly, any taxation system bodily lifted from a foreign country may not work in India considering the difference in economic, education, culture and sheer size aspects. Any system has got to be indigenised. And it is here, where all the local associations can play a vital role for a successful designing and implementation of a tax system.

8. Democratic style of functioning of the local associations

All the local associations work in a democratic style. Meaning thereby, large number of tax professionals are involved in the process. Committees and Sub-Committees are formed involving varied strata of professionals who in turn have interaction with varied strata of businessmen. So, the feedback is received from a diverse strata of dealers, in terms of nature and size of business.

9. Plough-back of resources

As stated earlier, all the local associations are rendering their valuable services in improving the tax system in their respective States gratuitously. If any fees are paid the same would be ploughed back for creating better research facility by providing better equipped libraries to their members and for organising citizen awareness programmes, as these associations are non-profit making as opposed to private professional firms. This would further help in better administration of a tax system in the respective State.

10. Have faith in Indian brains

History says that India has been the pioneer in any branch of science/mathematics or commerce.

Today also, Indians are playing key roles in foreign multinational companies. Diaspora of Indian-origin professionals are well-known for their brilliance: be it a branch of Pure Science, Medicine, Engineering, Law or Education. Now, time is ripe to recognise their importance at home!

Epilogue

To conclude, we would request your goodselves that while the Government(s) are in the process of designing a historic taxation system viz. GST, formally make all these local tax associations party in designing and implementing of the same and in the process let us build India as a super economic powerhouse of the world, together.

Jai Hind,

Ashvin A. Acharya
Editor

[Source : Editorial by Shri Ashvin Acharya, printed in Sales Tax Review, August, 2009]

1. http://www2.goldmansachs.com/ideas/brics/ten-things-for-india.html