Union Finance Minister Arun Jaitley today said the present indirect taxation system is in a "complete mess" and sought support of political parties and state governments for implementation of Goods and Service Tax reform.
"It is in a complete mess because somebody cultivates and produces a raw material, he sends to another state ...He pays VAT.. When it enters the particular city, he pays Octroi..They now add value. The value added product will again have tax.
"And this chain will go on there, four times when it is sold to the consumer... For every tax paid at next junction again tax is paid. So tax is also paid on the tax. So a product which would have cost X, now becomes X plus Y," he said.
"In the process some people think it is safest to avoid normal natural chain and deal illegally in these products--so you evade," he said.
The minister released a book 'K M Mani, a Study in Regionalism', on Kerala Finance Minister and Chairman of the Empowered committee of state Finance Ministers K M Mani.
Noting that some taxes are state taxes and others are central taxes, Jaitley asked,"can we not have a system where there is no tax on tax?"
"You have to converge the taxation powers of the state and the Centre into a common system," he said and sought Mani's support in managing cooperation with all state governments, political parties and the Centre to tackle the contradictions.
"...If you use the experience of 60 years on how to tackle contradictions, and how to manage contradictions and still come out with the most acceptable system which I must say to the credit of the empowered committee it has," the Finance Minister said.
"It (the empower committee) has come out with a system which has almost been accepted by all the state governments and Finance Ministers. And I think that will be the best footprints that you will leave behind because you would have brought probably the biggest tax reform in India which has capable of enhancing your GDP," Jaitley said.
Meanwhile, addressing a meeting of industries organised by BJP Kerala unit, Jaitley hit out at the Nehru-Gandhi family for blocking the government's reform measures, including GST.
Jaitley said he was saddened by the fact that they (Congress) ran a failed government and are expecting this government also to fail.
"Political families running the country is dangerous," he added.
