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Indian Budget 2009-10- Full Text- July 06, 2009


79. Madam Speaker, I shall now present my tax proposals.

80. As the House is aware, the thrust of reforms over the last few years, including the previous term of this Government, has been to improve the efficiency and equity of our tax system. This is sought to be achieved by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the base. These policy changes have been accompanied by requisite re-engineering of key business processes coupled with automation, both for direct and indirect taxes. On the direct tax side, a recent initiative for further improving efficiency is the setting up of a Centralized Processing Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns filed in entire Karnataka, will be processed.

81. These tax reform initiatives have produced impressive results. The Centre’s Tax- GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2 per cent in 2003-04. The healthy growth in tax revenues over the last five years is essentially attributable to growth in direct taxes. Further, the share of direct taxes in the Centre’s tax revenues has increased to 56 per cent in 2008-09 from 41 per cent in 2003-04, reflecting a sharp improvement in the equity of our tax system. The Government is committed to furthering this process of tax reform.

82. In the course of preparation of this budget, I have had the opportunity to interact with large number of stakeholders and receive valuable inputs. Most suggestions were for structural changes in the tax system. Tax reform, like all reforms, is a process and not an event. Therefore, I propose to pursue structural changes in direct taxes by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April, 2010 .

83. The Direct Taxes Code, along with a Discussion Paper, will be released to the public for debate. Based on the inputs received, the Government will finalise the Direct Taxes Code Bill for introduction in this House sometime during the Winter Session.

84. To further enhance efficiency in tax administration, I intend to merge the two Authorities for Advance Rulings on Direct and Indirect Taxes by amending the relevant Acts. This will enable the Authority for Advance Rulings set up under Section 245-O of the Income Tax Act, 1961 to also function as the Authority for Advance Rulings for Indirect Taxes.

85. I have been informed that the Empowered Committee of State Finance Ministers has made considerable progress in preparing the roadmap and the design of the GST. Officials from the Central Government have also been associated in this exercise. I am glad to inform the House that, through their collaborative efforts, they have reached an agreement on the basic structure in keeping with the principles of fiscal federalism enshrined in the Constitution. I compliment the Empowered Committee of State Finance Ministers for their untiring efforts. The broad contour of the GST Model is that it will be a dual GST comprising of a Central GST and a State GST. The Centre and the States will each legislate, levy and administer the Central GST and State GST, respectively. I will reinforce the Central Government’s catalytic role to facilitate the introduction of GST by 1st April, 2010 after due consultations with all stakeholders.

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