The Parthasarathy Shome committee on Tax policy and Tax Administration has asked for lowering of the rate of standard deduction on personal income tax to Rs 15,0000 in the next budget and ensuring the same tax rates for services as applicable for goods.
The committee, which submitted its final report today has also said that the state governments should draw up a common list of services that they will want to tax.
To allow a quick transition to broadbased dual system of value added taxation of services, the committee has suggested an interim method where the centre levies the tax and authorises the states to collect them. But CENVAT on goods and interstate VAT on interstate trade in services will have to be collected by the centre.
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The report has said the rate structure for the VAT on services should be identical to those for goods to avoid distortions in producer and consumer decisions.
It adds that a destination based dual VAT structure must be introduced rapidly over the next five years to ensure that the tax GDP ratio increases by atleast four per cent from the current nine per cent.
Shome said a higher tax GDP ratio is essential to find funds to finance the tenth plan, with a tentative real growth rate of nearly nine per cent. The committee was set up by the planning commission to decide on the way the country