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"We must move towards a simple taxation system"

Special Correspondent

Value Added Tax is only a first step, says CII president



Y. C. Deveshwar, president, CII, at a press conference in Chennai on Thursday. — Photo: Bijoy Ghosh

CHENNAI: "Value Added Tax is but a first, intermediary step. We must move towards a common Goods and Services Tax (GST), a simple harmonised system of taxation," Confederation of Indian Industry national president Y.C. Deveshwar said at a press conference here on Thursday.

On the eve of the CII's national council meeting, he said that "we need to create one single market for producers and consumers alike. They can all benefit from such a common system of taxation. VAT is not a perfect system and we see it only as a first step. There will be some infirmities in it."

Mr. Deveshwar said that if the European Union could adopt a single market it should be possible for a country such as India, despite its diversity and 29 States plus Union Territories, to work towards both a GST and a single market.

CII vice president R. Seshasayee said that VAT had created a "mixed situation." But a major impact was that it took away the "cascading effect." It had established links in the chain and broadened the base, bringing in more people into the tax net. There were "adjustment problems" but he was sure there would be a certain buoyancy before long both in revenue and in the economy.

Reservation issue

Asked for the CII's view on reservation in the private sector, Mr. Deveshwar said: "We are in total agreement with the objective. The question is how do we achieve it. In India, employment in the organised sector is just a fraction of the labour force and even there, the public sector dominates the scene. The private sector has a very limited strength. What we would like to say is that the private sector needs to be competitive and efficient. But there is a huge unorganised or informal sector that is dependent on the private sector. And that is where we can create all the employment. Take for instance a paper plant, which can employ 600 to 700 people. If we can source the pulp and wood to Indian farms and social forests, about 300,000 jobs can be created in this sphere."

Answering a question on the differences within the ruling coalition at the Centre, Mr. Deveshwar said that in India it was a democratic society, with about three million elected representatives at various levels. Decisions had to be taken on the basis of consultations and consensus. India was not China, where there was one-party rule.

The CII chief focussed on the rural economy and made out a case for enhancing not just the living standards of the people but also empowering them with bigger markets and higher disposable incomes. A GST would also be to their advantage.

CII's Southern regional Chairman Parasuraman R. said the confederation had moved forward from the theme of competitiveness to sustainability, with a clear commitment to societal, financial and environmental growth and protection.

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