TAX Reformation 1) Chelliah Committee Report: 2) Committee on taxation policy 2000 3) Vijay Kelkar committee on tax Problems: 1) Multiplicity

of taxes & different rate 2) Tax system is very complicated 3) Multiple exemption, incentives, concessions 4) Tax system is Inequitous 5) Countribution of direct & indirect taxes 6) Heavily taxed country 7) Experience of Lofer curve 8) Tax collection smaller (Tax avidance & Tax evasion) Chelliah Committee Report: 1) Simplification & rationalisation of taxation system 2) Recommendation in context of personal income tax 3) Corporate income tax 4) Treatment given to partnership firms 5) About wealth tax 6) Partnership firms 7) About excise duty 8) About custom duty Post Chelliah Committee Report: 1) Introduction of service tax (1995-96) 2) Introduction of VAT 3) Introduction of MAT 4) Introduction of fringe benefit tax Kelkar Committee: Tax Force 1) Recommended the concept of GST (Goods & service tax) 2) 3 tier structure Type Central Gov Central Gov Floor rate 6% 4% Standard rate 12% 8% Higher rate 20% 14% 3) Personal income tax 4) Corporate income tax Approach: Fiscal consolidation through revenue generation Need for reforms: A) Global factors: 1) Trend for globalization & liberalization 2) End of Socialism

3) Pressure from IMF & WB 4) Impact of Gatt & WTO A) Domestic factors: 1) Need for reforms in monetory & banking sector 2) Money & capital market (Waghul commitee) 3) Agriculture 4) Industries 5) International Trade 6) Public Finance (Taxation) International Trade: 1) Balance of payment as a statement 2) Equilibrium & disequilibrium 3) Popular defination/ IMF defination 4) Depreciation & devaluation 5) Appreciation & revalution 6) Balance of trade 7) World Bank & IMF Reforms: A) Abid Hussain Committee (1984) B) Budget V.P.Singh (1985) C) EXIM Policies a) Structural reform to settle crisis & new economic policy b) Structural adjustment programme c) Stabilization programme 1) Exchange rate (Devaluation of rupee, Dual exchange rate, FERA changed to FEMA 2) Treatment given to foreign investment (FDI) 3) Decanalization of imports 4) Drastics changes in the policies (Exim policies, outlooking policies) Developing India's International market 1) Encourage for star trading houses 2) Simplification & rationalization of procedure of taxation 3) Convertibility of rupees 4) Special economic zones 5) Encourage to export oriented units

Business Environment: Dynamic & flexible so need concurrent decision & strategy planning Strategic Decision Making: 7 steps 1) Determination of mission 2) Establishment of objectives & target 3) SWOT analysis 4) Constraint optimization 5) Consideration of strategic alternatives 6) Selection of strategic alternatives 7) Implementation of the policy

8) Evalution, control & change Internal Environment: within the business decided by company External Environment: outside the business A) Domestic (within country) 1) Micro- (Customers, competitors, financial intermediaries, marketing intermediaries) 2) Macro Macro 1) Economic- (Financial & capital mkts, banking, agriculture, industrial & fiscal) 2) Non-economic- (Political, social/cultural, technological, demographical & legal) B) International (outside country) Industrial sector reforms: 1) IPR (Industrial policy resolutions) 2) New industry policy 3) Budgets 4) Plan documents 5) Policy declaration (Central) 6) Policy declaration (State) 1947- Industrialization should be public sector dominated 1948- Classification of Industry 1) Reserved for public sector 2) Taken gradually by public sector 3) Joint sector 4) Private sector 1951- IDRA (Industrial development & regulation act) (Liscencing) 1956- IPR (Industrial policy resolution) A) Reserved for public sector for enhancing public sector B) Existing units in pvt sector (No new liscense for private ) C) Free hand for private sector 1969- MRTP 1985- Limit for MRTP changed (Restrictive & unfair trade practices) 1973- FERA (Foreign exchange regulation act) Reasons: A) Objectives: 1) Liberalization of Indian Industry 2) Making it private sector dominated B) World Bank & IMF Areas for reforms: 1) Industrial licensing 2) public sector policy 3) MRTP act 4) Foreign investment & technology 5) Package for small & tiny sector Objective of Reforms:

1) Consolidation of gains from development 2) Continuation of sustained growth 3) To correct distortion in industrial growth 4) Employement generation Process of Reforms: 1) Deregulation 2) Denationalisation 3) Decontrol 4) Delicensing

Financial Reforms: Financial Market 1) Money market (Primary- instrument sold/bought for first time; Secondary- Listed shares are traded) 2) Capital market (Primary- ; Secondary) Money Market: Waghul Committee (1988)- Recommended broadening & deepening of the financial markets S.Chakravarti Committee (1985)- Recommended broadening & deepening of the financial markets Organised- (Commercial bills, call money market, repo & reverse repo & CP, CD & PC) Unorganised- (Unregulated, private lenders, BOE, arbitrary rate of interest) Commercial bills: Bill of exchange (Trade bill & finance bill) 1) Prticipants- buyer, seller, bank, RBI, DFHI(Discount & Finance House of India) 2) Monetary Instrument 3) Secondary components Call Money market: Call rate is being decided by demand & supply variations Repo & Reverse repo: Certificate of deposits: Financial instruments are floated at a discount. Face value discounted & offered to subscr

Agriculture Reforms: 1) Structural macro policy reforms (positive & negative impact) Positive: 1) Terms of trade 2) Private investment 3) Technology 4) Specialization Nagative: 1) Affected some crops 2) Increased depedency on global prices which are volatile Fiscal & Financial liberilization:Impact on investment & credit Slowdown due to: 1) Structural macro reforms & 2)Globalization including joining of WTO 2) Reforms related to supply side factors Six deficit: 1) Investment, credit & infrastructure 2) Land & water management 3) Research & extension (technology) 4) Market 5) Diversification 6) Institution Reforms Need: 1) Achiving 4% growth 2) Equity in terms higher growth in lagging regions, small & marginal farmers & womens 3) Sustainability (tech,environmentally & economically) Others: 4) Efficiency (Cost reduction) 5) Group approach 6) Marketing of output at higher rate National agriculture policy-28 july 2000 Policy seeks: 1) Actualise vast untapped growth potential 2) Strengthen rural infrastructure 3) Promote value addition 4) Growth of agro business 5) Create employment 6) Fair standard of living 7) Discourage migration 8) Face the challenges of liberalization & globalization Policy aims: 1) Achiving 4% growth 2) Equity in terms higher growth in lagging regions, small & marginal farmers & womens 3) Sustainability (tech,environmentally & economically) 4) Growth based on efficient use of resources & conserve soil, water & bio-diversity 5) Growth that is demand driven Main Features: 1) Privatisation of agriculture & price protection of farmers in the post QR- use of technology 2) Private sector participation- contract farming 3) Private sector investment- Agriculture research

4) Dismantling of QRs 5) Enlarge market coverage 6) National live stock breeding policies 7) Protection through lesislation 8) Restriction of movement of commodities 9) Excise duties 10) TAX free 11) New sources of energy 12) Institutionalisation 13) Package insurance policy AOA: 1) Providing market access 2) Regulating domestic support 3) Containing export subsidies 1) Providing market access 1) Prevailing non-tariff barriers (Trade Distorting) were converted to tariff Reduced: Developed countries: 36% over 6 yrs Developing countries: 24% over 10 yrs Minimum market access- 5% 2) Regulating domestic support 1) Trade Distorting- (Amber box) 2) Non-trade distorting (minimal)-1) Green box 2) Blue box & 3) Special & Differential (S&D) box 1) Green Box- Environmental assistance, market information, rural infra & research & training (Excluded) 2) Blue Box- Direct payment in the form of deficiency payment (MSP) (Excluded but upper limit) 3) Special & Differential (S&D) box- Investment subsidies, input susidies (Excluded) 1) Trade Distorting- (Amber box) AMS- Aggregate measure of support 1) Product specific- Diff. bet domestic support price & external refernce price 1) Non-Product specific- Subsidy on various inputes (fertilizers, electricity, irrigation & credit) Reduced: Developed countries: 20% over 6 yrs Developing countries: 13% over 10 yrs 3) Containing export subsidies Reduced: Developed countries: Volume 21% & budgetory outlays 36% over 6 yrs Developing countries: Volume 10% & budgetory outlays 24% over 6 yrs Other Agreement: 1) Agreement on sanitary & phyto-sanitary (SPS) measures- Conforming international standards 2) Agreement on technical barriers to trade (TBT)- International testing & certifying bodies 3) Trade related intellectual property rights(TRIPs)- Plant varities Developing Countries & AOA: 1) Green Box arrangement to their maximum advantage

2) Commitment to reduce subsidies not shown willingness Globalisation & Indian Agri: 1) Ramesh Chand: Clubbing of all kind of support in one category , & then seek reduction in total support rather than AMS alone 2) V.S.Vyas: Food self sufficiency at the national level is desirable so that reliance on trade can be kept within limits 3) Deepak Nayyar & Abhijit Sen: World market prices are liable to move y-t-y fluctuations than domestics prices therefore dismantaling of trade barriers is likely to increase volatility of domestic prices & farm incomes 4) Rao: Needs to build-up adequate 'safety nets' to protect the interest of crops,people & regions which are likely to to be adversely affected by globalisation 5) R.Thamarajakshi: Should press for food security box, development bax to be placed along with green box2 6) IPR 7) Investment National policy for farmers: 2007- Recommendation of National commission on Farmers & consulting state gov. 1) Economic well being of farmers 2) Asset reformation 3) Water use efficiency 4) New technology 5) National agriculture bio-security system 6) Seed & soil health 7) Support service for womens 8) Credit & insurance 9) Gyan choupals 10) Social security scheme 11) Minimum support price 12) Food security

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