There is a need to improve the process for seamless production and distribution before moving from value added tax regime to Goods and Services Tax (GST), said advisor to Finance Ministry Parthasarthy Shome on Thursday underlining the need to reduce distortions in indirect taxation.

“What we need to see at the bottom-line is whether the new tax is going to become seamless for production decision making, investment decision making, getting input tax credit in the right manner, minimising wrong accumulation of input tax credit, facilitating inter-state trade and getting refunds from one state to the other,” said Shome while addressing an industry-government interaction organised by Assocham.

“If there is any improvement in each of these then I think GST is worthwhile over the VAT,” he said. Shome said the onus lies on the productive sector and the private sector in particular to analyse the impact GST will have in these kinds of matters on a day-to-day decision making and then making an investment despite having an indirect tax and that is the real directional movement as to why we need GST and that is a challenge.

On Direct Tax Code (DTC), he said “DTC is a fundamental churning of the income tax law and so it has to be seen whether DTC is able to come up with a real informed income tax or not.”

Shome said the government was analysing the comments on DTC given by the Parliamentary Standing Committee on Finance chaired by Yashwant Sinha and that it will be placed before Parliament in the Budget session.