Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004
Industry & Economy
3 key areas targeted for 24.6% revenue mop-up
New Delhi , July 8
THE Finance Ministry is targeting a 24.6 per cent growth in the Centre's gross tax revenues during this fiscal, which, it says, can be achieved through a `marked improvement' in industrial production, `continued buoyancy' in the services sector and mopping up huge `recoverable' arrears in both direct and indirect taxes.
According to the Revenue Secretary, Ms Vineeta Rai, currently about Rs 15,000-crore of direct taxes are pending recovery not on account of any legal dispute before various courts, but due to "absence of certain administrative inabilities to pursue these cases".
In indirect taxes, there is a similar recoverable amount of Rs 3,000 crore, which is largely undisputed.
The Budget has proposed to initiate a special drive to recover these arrears, for which the Ministry will set up a core team. "We can easily realise at least Rs 8,000 crore from this exercise", Ms Rai said.
The other area that is being targeted is services, which is budgeted to realise Rs 14,000 crore in 2004-05, against last year's Rs 8,300 crore. Even while admitting that the target was "ambitious", revenue officials say that the increase in the service tax rate from 8 to 10 per cent alone would yield over Rs 1,000 crore. Moreover, 13 new services are being added this year, widening the tax base.
But, on the other hand, the decision to exempt people with taxable income of up to Rs 1 lakh will cost the exchequer about Rs 1,700 crore. This will, however, be more than offset by the imposition of the 2 per cent cess on all direct and indirect taxes. The cess can yield Rs 4,000-5,000 crore in a full year, which means roughly Rs 2,500 crore this fiscal.
As for the 0.15 per cent tax on the value of security transactions, Ms Rai said that it would apply to all shares, debt instruments, gilts and futures and options in individual shares and indices traded in recognised stock exchanges. The new tax will generate about Rs 7,000 crore for a whole year, which means roughly Rs 4,000 crore in the current fiscal.
On the whole, the Centre's gross tax collections in 2004-05 are budgeted to rise by 24.6 per cent to Rs 317,733 crore. In the process, the Centre hopes to restore the tax-GDP ratio to the 1990-91 level of 10.1 per cent.
The ratio has been falling steadily in the post-reforms period, though the trend has been reversed from 2003-04 (see Table).
lso, nearly 44 per cent of the revenues this year would be from direct taxes, against only 19 per cent in 1990-91.
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