Government today approved setting up of a Tax Administration Reform Commission (TARC) to remove ambiguity and establish a stable and non-adversarial tax administration.

The decision was taken at the Cabinet meeting headed by Prime Minister Manmohan Singh here.

"The Commission will help in removing ambiguity in application of tax policy and tax laws, thereby establishing a stable tax regime and a non-adversarial tax administration," an official statement said after the Cabinet meeting.

The TARC "will facilitate an efficient tax administrative system that would enhance the tax base as well as tax payer base," the release added.

The Commission will consist of a Chairman, two full time members and four part-time members, of which at least two part-time members will be from the private sector.

The TARC will review the application of tax policies and tax laws in India in the context of global best practices and recommend measures to strengthen the capacity of the tax system in India that would reflect best global practices.

The Chairman will be an "eminent person" having wide experience of tax administration and policy making, the release said.

Full-time members of the Commission will be one member each with a background in revenue service pertaining to Income Tax and Central Excise and Customs respectively.

The term of the Commission will be 18 months. In his Budget speech, Finance Minister P Chidambaram talked about setting up the TARC.

"An emerging economy must have a tax system that reflects best global practices. I propose to set up a Tax Administration Reform Commission to review the application of tax policies and tax laws and submit periodic reports that can be implemented to strengthen the capacity of our tax system," he had said in the Budget speech on February 28.