GCCI: Phase out IT levies, ensure that small states have priority in disbursement of funds

Panaji:Income tax contributions and Surcharges lead to a reduction in Tax devolution to the states, said the Goa Chamber of Commerce and Industry (GCCI), calling on the 16th Finance Commission to Exit such Processes and tax surcharges.
GCCI wrote in its letter to the Chairman of the 16th Finance CommitteeArvind Panagariya, said that an increase in tax devolution will benefit small states like Goa, which have limited resources.
The GCCI has also stated that small states like Goa should be given priority in disbursement of funds and grants for government schemes.
Revenue from taxes and surcharges is not part of the divisible tax fund and therefore the taxes collected, which are estimated to constitute more than 20% of total tax revenue, are not shared with the states.
“This will reduce the share of tax devolution in gross tax revenue “The Centre’s tax collections are much lower than the recommended tax devolution. This, in turn, encourages states and local bodies to impose their own perpetual cesses to raise their own revenues,” said GCCI Director General Sanjay Amonkar.
“The impact of all these taxes is borne by taxpayers, which includes both employees and private sector companies.”
According to GCCI, the gradual abolition of perpetual taxes and surcharges would not only reduce the financial burden on taxpayers but would also contribute to simplifying tax laws.
Amonkar said there was no clarity on the ceiling for the levies or a target to achieve the objectives of the levies.
“Cess and surcharges are meant to be levied sparingly to meet a specific need and are usually imposed for a temporary period. However, it has been observed that the tariffs have increased over the years,” said Amonkar.
Finance Minister Nirmala Sitharaman called for a revision of the Income Tax Act within the next six months to simplify taxation and said indirect tax rates may be rationalised.
“Now is the right time to remove the cesses and surcharges that have been in place for many years. This, in turn, will reduce the overall tax rates for individuals and businesses and create tax certainty, which is a cornerstone of ease of doing business,” Amonkar said.
Amonkar also said that taxes should be levied only as a last resort and for a specific purpose.