Government Tax – A Perpetual Controversy

"A government should tax its people like a shepherd shears his flock or a bee gets nectar from a flower"--- Chanakya. If we go by this hoary definition it can be accepted that the imposition of tax on various subjects is a legitimate process of any government to generate income, and to use that money for national development. However, since time immemorial the notion of tax applied by the governments has always been controversial and till now that is highly prominent. The recent concept of VAT can be regarded as a fine example of this. It is true since ages always a reform is made for the benefit in the process of development. The first Income Tax was introduced in 1860. The main taxes collected by the State Governments are taxes on sale or purchase of goods. In this respect VAT (Value added Tax) happens to be a novelty, which has claimed international attention as more countries are adopting it in varying degrees to restructure their systems of taxation.

The concept of VAT, ever since the introduction of new economic policies of LPG (Liberalization, Privatization, Globalization) in India in the last decade, has brought forth debate regarding the restructuring of Indian fiscal system has been in the mainstream of political sphere and also the society. Now what is the reason behind this other than the generation of profit? The best answer of this can be that the Indian economy in this age of globalization is on race with other nations where its desire of transforming to a fast moving market economy has always been there. It should also be noted that the central emphasis on new reforms is to broaden the tax net and make it simple so that a layman can understand it. Nevertheless, from the very outset the introduction of VAT has created a furor. It was felt that cascading effect would increase. Indeed there was a good response from the Indian populace to revenue collections from the states that had implemented it.