Budget may do away with some tax exemptions

Budget may do away with some tax exemptions

Focus on tax rationalisation, says Adhia

Budget may do away with some tax exemptions
In an indication that this year’s Budget may focus on tax simplification and economic growth and not much on tax exemptions, the government on Wednesday said exemptions cost the exchequer Rs 2 lakh crore every year.

“The focus of the Budget should be on tax rationalisation and simplification. The focus should be on promoting growth, employment and in terms of giving some sort of level playing field to domestic manufacturers so that the Make In India can happen,” Revenue Secretary Hasmukh Adhia said on finance ministry’s YouTube channel.

Finance Minister Arun Jaitley will present the Budget for 2016-17 in Parliament on February 29.

Adhia said, removal of exemption will give people more fair deal by reducing income tax rate and remove inequity.

“Exemptions create inequity, it creates inequity between the existing unit and the new unit which is availing the exemption and it also creates inequity in terms of smaller companies and bigger companies,” according to Adhia.

Need early GST
According to the revenue secretary, removal of exemptions will help increase India’s tax to GDP ( gross domestic product) ratio which is abysmally low at 10 per cent at present. Tax to GDP is calculated by dividing the tax revenue collected by the government from the GDP of the country.

“In direct tax, we are losing about Rs 1 lakh crore in these exemptions. The cause may be noble, but it distorts the taxation system. In case of indirect tax also, we are almost losing Rs 1 lakh crore because of various exemptions given for SEZ,” he said.

Adhia also made a case for early implementation of Goods and Services Tax which will facilitate more foreign investment in the country. He said there was a need to do away with multiplicity of central and state government levies and the only solution to this is GST.