Letters: Tax comparisons

With reference to the column, "GST: Remains of a decade" (September 16), the author appears to have a rich knowledge of international taxation. Every point pertaining to the topic has been touched upon in the article, barring one: the reason for introducing the goods and services tax (GST).

I could not ascertain what the gain in revenue would be and why service tax was being made part of the GST. Also, I could not understand the effect of introduction of MODVAT, CENVAT or input tax credit. I remember that before the introduction of MODVAT the contribution of indirect taxes to revenues used to be 80 per cent and that of direct tax 20 per cent. Now even after the introduction of service tax, the effect is the opposite.

A consumption tax now, service tax earlier used to be called expenditure tax, a direct tax under the Expenditure Tax Act, 1957, that was repealed in 1987. If we exclude the collection of service tax from indirect tax collection, the net collection of indirect tax becomes negligible when compared to the collection of direct taxes. While discussing the GST, there is every reason to avoid tax on tax, but input tax credit should not eat into the taxation system of India.

S C Aggarwal, New Delhi

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