By SUBHASH CHANDRA AGRAWAL
Chief Justice of India just a few days before presentation of Union Budget at an event held to mark the 79th Foundation Ceremony of the Income Tax Appellate Tribunal on 24.01.2020 has rightly observed excessive taxation as a social injustice on the people, and tax-evasion as a form of social injustice on fellow citizens.
Maximum Income-Tax rate for individuals was drastically reduced to 30-percent following recommendations by Raja Chelliah Committee in the year 1993, giving desired results for increased tax-revenue with assesses smilingly complying with tax-laws. But subsequently with imposition of cess and surcharges, net highest effective income-tax rate has now become 42.75 percent with data exhibiting that for the first time in last two decades, direct-tax collection in current fiscal-year of 2019-20 is likely to be less than that of earlier year.
Haphazard and irrational GST rate-structure with too many slabs and faulty Input-Tax-Credit system with an unreasonable and excessive GST-rate of 18-percent on many items and on service-sector is resulting in creation of black money and increased cash-circulation of 20-percent above than at time of demonetization.
Maximum effective Income-Tax rate should be restored to 30-percent abolishing cess and surcharges. Permanent voluntary Disclosure Scheme can be introduced whereby declarants may be required to compulsorily invest 20-percent of undisclosed income in long-term low-interest Infrastructure Bonds apart from 30-percent highest Income Tax slab.
Likewise GST rates of 3, 5, 12, 18 and 28 percent may be reduced to two slabs of 10 and 30 percent. Cess on luxury items may be replaced by additional GST slabs in multiples of 50 or 100 percent. With such abolition of higher GST slabs of 12 and 18 percent, Input-Tax-Credit can be retained only on trade-activities abolishing from manufacturing and service sectors. Some basic raw-materials in such a scenario like unbranded cotton and yarn can be put in zero tax-slab.