Our Bureau

`Speedy integration of services with commodities taxation important'

MR ASHOK LAHIRI

Kolkata , June 26

Describing value added tax as a success story, because it has ushered in great changes, Dr Ashok Lahiri, the Chief Economic Advisor of the Department of Economic Affairs, said here that speedy integration of services with commodities taxation was very important from the economic growth point of view.

Talking to newspersons , after addressing members of the Bengal National Chamber of Commerce and Industry on `Economic Reforms in India', Dr Lahiri said the timing for introduction of Goods and Services Tax (GST) in 2010 was perfect, as enough time has been allowed for making the necessary statute and other legislative changes to put GST in place.

He said one couldn't rush into it as a lot of understanding between Centre-States has to come about for preparing the ground before GST can be put in place. Commenting on the strong macro-economic fundamentals , which has ensured a steady 7.5-8.5 per cent GDP growth, he admitted that while the labour force was growing, employment was not growing fast enough. Seeking double-digit industrial growth, for which the infrastructure has to be beefed up, he said some labour market flexibility too has to happen.

Citing the massive investments that will be required for infrastructure development if the second phase of economic reforms has to be speeded up, he said a public private partnershipapproach, especially at the state level, was most essential adding the Infrastructure Committee, headed by the Prime Minister, has already recommended government guarantees for fund raising.

Better tax system

When asked about FII investments and the recent capital market turmoil, he admitted that FDI had a longer time horizon, as it also brought along technology, unlike FII investments, which were essentially short term in nature.

Earlier, Ms Nayantara Palchoudhuri, the president of BNCCI, said there was an urgent need to increase the tax-GDP ratio through improved tax administration measures. She said the Indian tax system was archaic with complex and cumbersome procedures, multiplicity of rates, numerous exemptions and large areas of discretion, "all of which lends itself to evasion by taxpayers and harassment by tax authorities".

She felt it was necessary to reduce tariffs, harmonise state taxes, widen the tax net and amend Rent Control Acts.

She also called for major infrastructure reforms in areas like energy, transport and telecom.

© Copyright 2000 - 2009 The Hindu Business Line