An open letter to Finance Minister Nirmala Sitharaman

arrive,
Dear Minister of Finance,
Government of India,
North Neighborhood, New Delhi.

Topic: Proposals to simplify direct and indirect tax regime in upcoming budget

Dear Madam,

I am writing this letter to humbly offer some thoughts for you to consider as you prepare for the upcoming federal budget. The recommendations are designed to simplify taxation, reduce litigation and promote economic growth while leveraging cutting-edge technology for the long-term progress of the country.

1. Simplification of direct taxes

A simplified direct tax structure can improve compliance, reduce litigation and increase transparency in the system. I make the following suggestions:

• Two levels of tax rates: Standardize the direct tax rate for businesses to 25% and the direct tax rate for salaried income to 20%, thereby eliminating optional systems and complexity.

• Simple legislation: Redraft the Income Tax Act into a concise five-page document, plain and simple, leaving no room for interpretation.

• Global Treaty Network: Expand India’s tax treaty network to facilitate ease of doing business while standardizing TDS rules to avoid confusion.

• Resolution of controversial issues: Introduce sunset clauses for unresolved disputes to ensure that remaining disputes are permanently concluded.

2. Allocation of AI-driven R&D

To ensure India’s position as a global technology and innovation leader, significant investments in AI-led R&D are necessary:

• Allocate 6-10% of national budgets to AI-driven initiatives to achieve breakthroughs in areas such as healthcare, agriculture, education and defence.

• Establishing state-of-the-art AI laboratories and public-private partnerships to promote innovation and commercialization.

• Use AI to improve tax compliance, fraud detection and resource allocation, reduce leakage and increase efficiency.

3. Transform GST into a truly good and simple tax

GST reforms have the potential to significantly improve economic efficiency and transparency. The following roadmap can serve as a guiding framework:

• Single standard rate: Transition to a unified Goods and Services Tax (GST) rate of 15%, phasing out multiple criteria and exemptions except for basic necessities only.

• Incorporate key departments: Bringing petroleum products, ATF and other contentious commodities under Goods and Services Tax (GST) and ensuring seamless input tax credit (ITC) process.

• Litigation-free environment: End all pending litigation by issuing clear guidance and prohibiting retroactive modifications. Set up a task force to comprehensively rewrite the Goods and Services Tax laws.

• Technology integration: Leverage artificial intelligence and machine learning for proactive fraud detection, compliance monitoring and ITC optimization.

• Equity and Support: Offset the impact of the GST on disadvantaged groups through direct benefits such as healthcare, pensions or food assistance until income levels rise or insurance penetration increases.

Implementation timetable:

• Short term (6-12 months): Resolve all pending litigation, initiate direct benefit schemes, and transition to a single GST rate.

• Mid-term (2027): Full integration of technology-driven compliance mechanisms and implementation of common ITC processes.

• Long term (2030): Phase out direct benefit transfers and achieve a transparent and efficient GST system as per capita income increases.

in conclusion

These measures reflect the vision of simplicity, transparency and innovation in India’s tax system. By implementing these reforms, we can create a strong framework that promotes economic growth, reduces administrative burdens and builds trust among taxpayers.

I believe these recommendations are in line with your vision for India’s economic progress. I implore them to include this in the upcoming budget, and I would be honored to contribute further to this important conversation, if needed.

End of article