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“The new
tax regime will reduce prices of manufacturing goods,
attract higher investment and create employment due to
its rationalisation and simplification of taxes,” Kelkar
told reporters on the margins of a conference.
Noting that the Indian manufacturing sector was highly
taxed, Kelkar said the elimination of multiple tax
structure at central and state levels would make the
sector viable and globally competitive.
“Our manufacturing sector is one of the highest taxed
sectors in the world. Even a two percent reduction in
production cost will increase profits by over 20
percent, giving headroom for reducing prices and
benefiting end-users,” Kelkar said after addressing the
conference on the GST at the national executive meeting
of the Federation of Indian Chambers of Commerce and
Industry (FICCI).
Hoping that the central and state governments would
build a consensus to introduce the GST from April 1,
2010, Kelkar said such a move would perhaps be the
single-most important reform stimulus since the 1991-92
economic reforms.
“A flawless GST will remove the historic tax-induced
bias against the manufacturing sector and increase the
growth in the output, export and blue collar
employment,” Kelkar asserted.
Under the terms of reference, the finance commission had
set up a task force to study the impact of the GST on
the country’s finances and foreign trade.
The panel also commissioned a study by the National
Council for Applied Economic Research (NCAER) to assess
its impact on the GDP (gross domestic product) growth
and exports.
“The study indicated that the GDP can grow by 2-2.5
percent with the implementation of a well designed GST
and exports can be increased by 10-14 percent,” Kelkar
said.
The task force report on GST will be uploaded on the
panel’s website by this month-end.
On the states’ demand for a two-slab system in the GST,
Kelkar said the empowered committee of the state finance
ministers would soon come out with a paper on the pros
and cons of a single or twin rate structure.
The GST will be a dual tax with both central and state
GST component levied on the same base.
All goods and services barring a few exceptions will be
brought into the GST base. There will be no distinction
between goods and services for tax purpose with a common
legislation applicable to both.
“There should be an identical GST laws across states and
the centre for the new tax regime to be effective. A
unified approach will simplify procedures, eliminate
bottlenecks and reduce transaction costs for dealers,”
Kelkar added.
Source
: SINDH TODAY, India, dated 12/10/2009
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