Don't roll back tax sops, focus on tax reform: Experts to Govt

The new UPA government should not roll back tax cuts but focus on tax reforms like starting GST from next fiscal and putting in place a new direct tax code to replace the Income Tax Act to boost economy, analysts have said.      

"Reduction in excise duty, just let them be. They should not be rolled back," economic research body ICREAR director Rajiv Kumar told PTI.      

Foundation for Public Economics and Policy Research Director Mahesh Purohit said cuts in service tax and excise duty should not be rolled back either.      

To spur the economy, facing slowdown under the impact of global financial crisis, the government had announced three stimulus packages by cutting the excise duty by six per cent and the service tax by two per cent, among other fiscal sops.      

Aseem Chawla of the leading law firm Amarchand Mangaldas also said," I don't think it should be rolled back for the time being."      While Purohit said  the country will soon move towards Goods and Service Tax (GST) and the rates for excise duty or service tax cannot be more than GST.      

Rates of GST, proposed to be implemented from April 1, 2010, has not been decided yet. GST will replace excise duty, service tax at the Centre and VAT at the state levels.      

The Congress in its election manifesto had said that it will take decisive step and introduce a moderate tax. "A stable government is in place, we hope that the unfinished agenda of tax reforms like GST and the direct tax code will come in place," Chawla said.      

The business community and the citizens impacted by the tax reform process hope that the process will get an impetus and the correct implementation of the reforms will ensure that unwanted litigation is reduced, Chawla said.      

In fact, the implementation of the tax code assumes importance as direct tax code if brought in time and has all the anti abuse and anti avoidance provisions, will even take care of things like money laundering and tax evasion, he said.      

Direct Tax Code is expected to replace nearly five-decade old Income Tax Act to streamline the taxation structure and reduce the plethora of exemptions given to various segments of taxpayers.      

Meanwhile, leading tax consultancy firm Ernst & Young partner Srinivasa Rao said that the new government with UPA at the center will give a boost to implementation of tax reforms.      

"In terms of tax policy definitely this will give impetus to GST implementation. A lot of thought process has gone in these tax reforms so the factor of continuity and stability to the policy group will surely help," said Rao, who is also national leader Tax Practice from Ernst & Young.      

Rao said there should be pragmatism in tax administration and collection to minimise litigations which are currently too many in the area.