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March of the Professional |
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Inaugural Session Speech by |
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It is a matter of great honour for me to be associated with National Tax Conference – 2009, which has been organized by All India Federation of Tax Practitioners (East Zone) at Jamshedpur. This is the 4th Conference at Jamshedpur after 1991. 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. With the promise of implementation of VAT from 1-4-2004 we were quite sure that tax laws shall be simpler. However, the scene is quite contrary in different States. 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 situation of the country. The Empowered Committee has been constituted for introduction of GST in the country which is a State Subject derived from Entity-54 of the State List (List II of VII Schedule of the Constitution) for which the States are sovereign in taking decisions. The Empowered Committee of State Finance Ministers constituted by Ministry of Finance, Government of India, on the basis of resolution adopted in the Conference of the Chief Ministers on 16-11-1999 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: “2.16. As mentioned earlier, all other existing taxes such as turnover tax, surcharge, additional surcharge and Special Additional Tax (SAT) would be abolished. There will not be any reference to these taxes in the VAT Bills. The States that have already introduced entry tax and intend to continue with this tax should make it vatable. If not made vatable, entry tax will need to be abolished. However, this will not apply to entry tax that may be levied in lieu of octroi.” 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 Simpliciter 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. 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. 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 Government 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. 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 difficult to remember by making various sub-clauses. This is what has happened under VAT Act also. However, the Empowered Committee has suggested dual GST; one Central GST and other State GST. The introduction of GST may establish a transparency supported which may bring down the peak rate of tax and may enhance revenue growth in the real sense. However, the rate may touch up to 20% both with Central GST and State GST, as contemplated. However, nothing sure can be said at this stage. 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, 1939 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 assessees 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. 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 Laws are (i) Boothalingam Committee Report, (ii) Wanchoo Committee Report, (iii) Raja Chelliah Committee Report, among others, (iv) Abolition of Estate duty, (v) Repeal of Gift Tax, (vi) Streamlining of the Wealth-tax Act are but a move in this direction. The Hon’ble Finance Minister, Shri Pranab Mukherjee, while presenting the Budget Speech on 7-7-2009 stated that the draft of proposed Direct Tax Code will be available within 45 days for public comments. 5 years back, the earlier Hon’ble Finance Minister, Shri P. Chidambaram, had also promised in his first Budget Speech (with UPA Government), that the Direct Tax Code will be released soon. However, the same was not released. In India, there are already Codes on various subjects like Civil Procedure Code, Criminal Procedure Code, Indian Penal Code etc. Instead of Act, there will be a Code. As such there is no legal difference between an Act and Code. Both are passed by both Houses of Parliament and approved by President. Generally word “Act” is used when there is a single law. Whereas “Code” is a systematically arranged collection or compendium of laws, rules, or regulations and any set of standards set forth. We are familiar with Income-tax Act, 1961 and Wealth-tax Act, 1957. Direct Tax Code is very vast Code having 285 sections divided into 16 Chapters and there will be 18 schedules. The present Finance Minister had released the draft Direct Tax Code bill for public debate within 35 days of his statement. This is highly commendable. Significant efforts have been made to simplify the Direct Taxes. 2. The Direct Tax Code will be a single code for all direct taxes. It will cover (a)
Income-tax, 3. Some Direct Taxes are not covered like (a)
Securities Transaction Tax (STT) and This 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 plant. They have to be re-written for bringing about simplicity, clarity and to make procedures and implementation more and more transparent and hassle-free. It would quite be in order as long as these laws are minimal, focused and simple to operate and adhere to.” I unquote Nine years have passed from the aforesaid conference of Jaipur, the simplicity of the provisions of tax laws which was expected are yet to achieve. Direct Tax Code is scheduled to apply w.e.f. 1-4-2011. This code is scheduled to pass by the Parliament within one year. Definitions of various words have been given in section 284. This section contains 318 definitions. Code has been drafted in simplest form and it has tried to avoid explanations, provisos, exceptions, etc. 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. I suggest that the matter should be taken up at regional level by all the zonal committees of AIFTP so that a proper representation may be made before the Central Government. 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 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. In the next two days we shall be deliberating several burning issues under Income-tax Act, VAT and Service Tax Act. With these words, I thank all of you again for being associated with All India Federation of Tax Practitioners which itself is a body of National Tax fraternity and national integration. Jai Hind. |