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Abstract
Indian Indirect Tax system has been reformed several times since its evolution. Having emphasis on better government revenue collection, India has introduced various taxes on goods and services such as MOD VAT, CENVAT, Service tax and State VAT etc. This paper examines past and current Indirect tax system with the objective of finding some ground for the implementation of proposed GST (Goods and Services Tax) using secondary data sources and find drawbacks of current indirect taxes, Positive international experience and unique features of GST lead the policymakers in knocking the door of revolutionary Indirect taxation reform.
Keywords: Taxation, Indirect tax, Tax reforms and GST.
Introduction
Taxation is a very important and critical source for the development and growth of an economy. Objectives of the tax policy of a country should be akin to its general economic policy. The major part of revenue of a government comes from taxation whether it is direct tax or indirect tax. A sound tax system is very important for the development of the good health of public finance of any country8. That's the reason; various taxation reforms in different countries are being witnessed in the era of globalization.
The world has witnessed significant reforms in tax policies and systems since last two-three decades. These reforms are mainly in support of the development strategy of the economy, increasing globalization, the motivation to make the tax system in tune with international best practices and find some solution for fiscal imbalances. India is no exemption of it. The main specialty of Indian tax system lies on constitutional powers. Taxes are levied at both centre and state level. Some taxes are also levied by local authorities. Schedule VII of Indian constitution enumerates powers to levy taxes into three lists.
Indian taxation system can be divided into two parts namely Direct tax and Indirect tax. Direct tax is the tax directly paid to the government by assessee such as Income tax. Indirect tax is paid by intermediaries to the government after collecting from the person who ultimately bears the burden such as value added tax (VAT). Centre government levies indirect taxes such as service tax, central excise duty, CENVAT and custom duty etc. State VAT, central sales tax (CST) and entry tax etc....