Move from dual-VAT to national level GST: PwC official
August, 19th 2006
India must move away from dual-VAT system and look at adopting a European model of a federal-level goods and services tax (GST) by 2010, Ms Ine Lejuene, Leader of PricewaterhouseCoopers (PwC) Global VAT/GST Network, has said.
As the country prepares to introduce GST on April 1, 2010, she felt that it would be a best practice for the tax policy makers here to embrace the European model of federal level GST. Ms Lejuene also highlighted that federal level GST would help attract foreign direct investments (FDI) as companies prefer a less complex system.
"As India goes in for a GST, it is better to go in for best practice and avoid those that would make it more complex. GST in Europe is always at the national level. You cannot have any levies at the community level that is in the nature of consumption tax," Ms Lejuene told Business Line.
As part of her India visit, she had met Dr Parthasarathi Shome, Advisor to the Union Finance Minister and also senior officials of the Empowered Committee of State Finance Ministers on VAT.
Asked whether she had given any policy recommendations during her interaction with Dr Shome, she said that her basic recommendation was that India must definitely execute its plans for moving to a GST by 2010.
Besides discussing the merits of European model, the VAT expert had also suggested that policy makers must reflect upon perhaps using the positive experience that Europe had in using a broad definition of services instead of working with a list of transactions that qualify for service. The other recommendations made include the need for a court at the national level to look at VAT related issues.
Mr S. Madhavan, Executive Director, PwC said that all exemptions (sales tax as well as central excise related) ought to go if a clean and relatively simple GST is to be introduced from April 1, 2010.