The introduction of goods and services tax (GST) would cut down on the number of litigations by revamping the current multiple indirect tax structure, Law Minister M Veerappa Moily said here today.
"Multiple tax complexity increases the transaction cost, litigation and uncertainty," Moily told a conference on international taxation organised by the Income Tax Appellate Tribunal here today.
The law minister pointed out that GST would help the government earn more revenues.
The GST implementation, which has been deferred from its earlier scheduled date of April 1, will replace most of the indirect taxes at the Central and the state level.
He said the current tax structure is a major constraint on competitiveness as it results in increasing the cost of major goods and services.
"The cascading impact of taxes increases cost of indigenous goods by 10-20 per cent. It is a barrier to a common market for growth and leads to production and distribution inefficiency," he said.
Citing proposed reforms in the direct tax front, wherein the new direct tax code is to be effective from April 2011, he said the country's taxation regime is dynamic.
Saying that the country has the potential and opportunity to become a growth engine for the global economy it it takes appropriate policy initiatives and reforms, he said, "Key enablers would be competitiveness, improved productivity infrastructure, good governance and social harmony."
Addressing the conference, Chief Justice of India (CJI) K G Balakrishnan said the differential treatment in direct tax would help people who earn less. He said tax laws ensure that unduly high tax rates are not imposed and everyone pays as per their earning.
The CJI also said with the inflow of foreign direct investment, tax laws come handy in handling disputes.