Why was there a need for tax reforms in India?

By Ritesh|Updated : September 6th, 2022

There was a need for tax reforms in India to ensure its competitiveness abroad and satisfy the market economy's needs. An economy based on markets replaced the centrally planned development model.

  • Manmohan Singh, who served as finance minister then, suggested appointing the Tax Reforms Commission in 1991. (TRC).
  • The head of the Tax Reforms Commission was Raja Chelliah (TRC).
  • Invariably, A fiscal crisis is an immediate justification for a tax system overhaul.

Some of the observations made by the TARC are mentioned below

  • The Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs are the two tax administration bodies that come before the Revenue Secretary in the current organizational structure (CBEC).
  • Even though he is not an expert in tax management, the Revenue Secretary has the final say before the Union Finance Minister is involved.

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

  • Regarding the CBDT and the CBEC, the second remark was that there appeared to be an unnatural separation between the two and that there was a lack of cooperation between the two boards.
  • One of the countries with the most tax disputes involving taxpayers and the government in India.


Why was there a need for tax reforms in India?

India needs tax reforms to meet the market economy's demands and maintain its competitiveness overseas. The centrally planned development model was replaced by an economy based on markets.

  • In 1991, Manmohan Singh, the finance minister at the time, proposed the formation of the Tax Reforms Commission (TRC).
  • Raja Chelliah served as the commission's chairman.
  • A budgetary crisis is always the primary argument for changing the tax code.


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