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Indirect Taxes

.finished products meant for consumption by end users and collected from small scale producers like handcraft, food products, agricultural produce etc. by wholesalers (this shall not include spares or components or any goods used as input for production of other products). A restriction must be put to tax only the finished products which is consumed/used by a common consumer. There is a need to reduce tax collection points to minimum. A study team may be formed to find and recommend products in details. Aim should be to collect taxes at least possible points and the items should never be taxed twice or more. In my opinion the collection points should be restricted as under:-

1. Factories producing goods for consumption by a citizen. (Citizen man may be poor or rich or stinking rich). Small scale factories may produce goods for direct consumption by citizens or components for producing machines. Machine component must not be considered as final product because it cannot be used or consumed by a citizen. A motorcycle is a product used by a citizen but its wheels are not the final product. So taxes should be levied on motorcycle but not on wheels.
2. Wholesalers collect goods from small producers and sale to retailers. Whatever goods where no tax has been collected earlier in any location shall be liable for taxing while wholesaler sales to retailers.
3. Imported goods (Both components and finished goods).

There should be only TWO taxes and levied at a SINGLE point be it finished goods or service. First Central Tax and second State Tax. Both the taxes should be equal for a certain item. Taxes may be collected by a single agency and deposited in respective Government account. A situation would arise where good are manufactured in one state and sold in other state or service provider is in one state and the work is another state. In such a case procedure should be laid for sharing the state tax. State where taxes are collected should pay 50% of the collected tax for quantum sold in another state after producing proper proof. Similarly State Government should pay to municipal corporations/municipalities/gram panchayats a certain predefined part for the goods/services finally sold in the respective locality.

This suggestion may appear to be abstract but the benefits are innumerable and tax evasion can be curbed, more or less totally. This will solve problem of sharing taxes by centre and states. This will do away with different taxes at various levels by various agencies. Virtually this will make tax-free state and save all botherations at all levels. This needs list of all commodities and services and decide on tax structure, procedure for sharing taxes, organising collection agency and timely distribution down to Gram Panchayat.

There is a requirement to prepare a list of goods/commodities which are consumed basically by a large population. Government levies taxes and then gives subsidy on certain products/inputs etc. Government should list out such items for making them 'Tax-Free' Example is fertilisers. If fertilisers are used by farmers alone and the Government wishes to help farmers then why should Government levy any taxes and then subsidy. If taxes are not levied at any stage fertilisers shall be cheaper and there shall be no requirement to give subsidy. There is no justification for levying taxes on widely used item like table salt. The Government should prepare list of such items and must not levy any taxes.

 

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