Why was there a need for Tax Reforms in India?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

There was a need for tax reforms in India to ensure its competitiveness abroad and to meet the needs of the market economy. The economy based on markets replaced the centrally planned development model. Manmohan Singh, who then served as the Finance Minister, suggested the appointment of a Tax Reform Commission in 1991.

Need for Tax Reforms in India

Raja Chelliah was the chairman of the Tax Reforms Commission (TRC). A fiscal crisis is almost always an instant argument for a tax system revision. In the current organizational system, the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs are the two tax administration authorities that report to the Revenue Secretary (CBEC).

  • Despite his lack of expertise in tax administration, the Revenue Secretary has the final say before the Union Finance Minister is involved.
  • The second observation was that there appeared to be an unnatural separation between the CBDT and the CBEC, as well as a lack of coordination between the two bodies.

Note: The Central Board of Indirect Taxes and Customs has replaced the CBEC (CBIC).

  • India is one of the countries with the greatest tax disputes between taxpayers and the government.
  • Manmohan Singh, the finance minister at the time, recommended the establishment of the Tax Reforms Commission in 1991.
  • The primary justification for modifying the tax law is always a fiscal crisis.


Why was there a need for Tax Reforms in India?

To meet the demands of the market economy and retain its international competitiveness, India needs tax reforms. The centrally planned development paradigm gave way to a market-based economy.

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