Tax Reforms in India

When the Indian economy faced an unprecedented macroeconomic crisis in 1991, fiscal consolidation constituted a major objective of the policy response. For this purpose, it became necessary to: (a) enhance tax and non-tax revenue, (b) curtail current expenditure growth, (c) restructure public sector undertakings, including disinvestment, (d) improve fiscal-monetary co-ordination, and (e) deregulate financial system. The need for improvements in budgetary practices led to the enactment of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which ushered the Indian economy in an era of fiscal consolidation based on fiscal policy rules. Tax reforms introduced by the Government since 1991 have helped to build a structure which is simple, relies on moderate tax rates but with a wider base and better enforcement. Moreover, they have helped in correcting structural imbalances in the tax system. They are soft on industry with a view to create new investment climate and make India internationally competitive. By lowering the tax rates, the Government expects speedy industrial development and hence buoyancy in tax revenues.The country is keenly awaiting implementation of Direct Taxes Code (DTC) and National Level Goods and Services Tax (GST). GST is Indias most ambitious indirect tax reform. Lack of political consensus is holding up progress and implementation of GST. This book gives a vivid account of recent reforms in the Indian tax system as a part of the on-going policy of liberalisation and globalisation of the Indian economy.