The Public VAT i.e. the VAT Board of India has recently announced several revenue proposals to be brought in for the year 2011/12. The three revenue proposals are as follows: a consolidated basic tax base (which is basically the same as the current basic tax system of India), a unified goods and services tax (which is basically the same as the currently existing customs duties and central Excise duties), and a centralized carbon tax. These three revenue proposals have been discussed in detail in the following article.
A consolidated basic tax base means that all items of sales and purchase will be subjected to a single rate, which will be inclusive of all taxes. This will in effect, make the collection of taxes easier. In fact, the implementation of such a scheme would result in the collection of taxes coming from all the stakeholders more smoothly. Under this scheme, goods and services are essentially exempted from local and state taxes, and also from the various types of additional duties. All the three taxes – including the central Excise – will be included in the consolidated base price.
Unified goods and services tax will enable all the stakeholders in the Indian economy to enjoy the same tax treatment irrespective of whether they are consuming or producing their products or providing any service. Under the PTI proposal, service charges are levied on all produce and other processed goods irrespective of whether the production occurs in a remote area or in a city. However, if the processing takes place in a city then the service charge will be imposed on that basis only. This tax proposal has the support of all the states in India except Kerala. The federal government has rejected this proposal in the past as well.
The second proposed tax measure is unified goods and services tax. Under this proposal, service charges will be imposed on all produce and other processed good regardless of whether the production takes place in a remote area or in a city. However, if the production takes place in a city then the service charge will be imposed on that basis only. This tax proposal has the support of all the states in India except Kerala. The federal government has rejected this proposal in the past as well. However, the state governments have been able to secure adequate amendments in this regard.
The third proposed tax measure is a national sales tax. The basic feature of this tax measure is a uniform nationwide rate of tax. It is believed that a uniform nationwide sales tax will reduce competition among the companies and ultimately lead to more revenue for the state.
The fourth proposed increase in the General Sales Tax is one that has already been debated in the lower house of the Parliament. The proposal seeks to increase the level to be charged by 40%. Earlier, the proposal had been rejected by the lower house but the house passed it in the final session in May.
The fifth and final increase in the General Sales Tax that the PTI proposes is based on the revenue percentage of the goods and services sold by the company at a single location. If the company has outlets at multiple locations then the tax will be calculated on the value added tax (VAT) basis. A few states like Jharkhand, Delhi and Orissa have already exempted the VAT from their sales tax. The proposed increase in the General Sales Tax is yet another attempt by the PTI to raise funds for their campaign for the coming general election. Earlier, the PTI had promised an additional five percent income tax on the retail price of the goods and services sold by retailers. But this VAT hike by the PTI cuts short the profits of these businesses.
The next phase in this latest proposal is to revise the way auctioning of lands and real estate is done in the country. This means that the original concept of ‘efficient property auction’ would be scrapped and a new concept of ‘efficient leasing/ purchasing’ would be introduced instead. The way the auctions are conducted currently involves a middleman or an agent who estimates the value of a property and then tries to make the sale work according to the demands of the buyer. Since this proposal does not involve a middleman or an agent, this would mean a simpler process for the buyer and an easier deal for the seller as well.