Support for Kelkar

Without passing any judgement on the recommendations of the Kelkar task force on direct and indirect taxes, the survey has stated that 8216;the follow up on the recommendations of these task forces is expected to result in improved tax collections in the medium term8217;. However, the survey made a passing reference to the crux of the reports and in fact to some extent accepted the recommendations while stating that 8216;modernisation of tax administration, broadening the base and restricting the exemptions to the bare minimum may improve revenue collections8217;.

Doing away with the tax exemptions and modernising the tax administrations are among the two major recommendations of the task forces. The survey also stated that so far the main focus of reforms in both direct and indirect taxes have been on the rationalisation of the tax rates while the existence of unorganised sector, evasions and exemptions led to a major decline in the tax-GDP ratio. The survey also said that so far the tax reforms have been confined to the central government. However, with the State governments deciding to introduce VAT from April 1, 2003, this position has changed, the survey stated.