Adhia hints at tax rationalisation

The upcoming Budget for 2016-17 would focus on tax rationalisation and simplification besides providing a level-playing field to domestic manufacturers to facilitate Make in India, hinted revenue secretary Hasmukh Adhia on Wednesday.

With a fortnight to go for finance minister Arun Jaitley to present the Budget, Adhia said the focus should be on promoting growth and employment.

"The focus of the Budget should be on tax rationalisation and simplification. …promoting growth, employment and providing some sort of level-playing field to domestic manufacturers so that the Make In India can happen," Adhia said in the finance ministry's YouTube video.

On the need for phasing out of corporate tax exemptions, which cost the exchequer about Rs 2 lakh crore annually, Adhia said the move was necessary to provide a level-playing field to domestic manufacturing companies even though completely eliminating those was not possible.

"Exemptions create inequity, between the existing unit and the new unit which is availing itself of the exemption and it also creates inequity in terms of smaller companies and bigger companies," he said.

The government is expected to cut corporate tax rate by a small percentage point in the upcoming Budget as part of its plan to reduce it to 25% from 30% in four years, as promised in the Budget for 2015-16. Towards that, the Budget will also lay down the roadmap to simultaneously phase out exemptions given to the corporate sector to reduce the tax rate, simplify administration and improve India's competitive edge globally.

"We cannot completely eliminate exemptions... If we are able to reduce the number of exemptions, then the amount we are losing in exemptions we would be in a better position to reduce taxation rates," he said.

Adhia said that reducing exemptions would enable the government to reduce income tax rate and give a fair deal to taxpayers. "In direct tax, we are losing about Rs 1 lakh crore in these exemptions. The cause maybe noble, but it distorts the taxation system. In the case of indirect tax also, we are almost losing Rs 1 lakh crore because of various exemptions given for SEZ, EOU."

The tax department has already come out with a draft roadmap for phasing out tax exemptions, and the final roadmap would be unveiled in the Budget.

Adhia said removing the exemptions would also help in improving the tax-GDP ratio, which is currently around 10 percent. "There is a need to increase the tax-GDP ratio but you also have to see the capacity of people to bear that kind of taxation burden. If we simply rationalise the taxation system and remove the exemptions, I am sure the tax to GDP ratio can be enhanced substantially," he added.

In order to attract foreign investment, Adhia said there was a need to do away with multiplicity of central and state government levies and the only solution to this was the GST. The Goods and Services Tax would usher in an unified indirect tax regime, which will subsume various levies like excise, service tax, sales tax and octroi.

Adhia said the tax department was making efforts to reduce litigations. At present 340,000 litigations are pending in direct taxes and another 136,000 in indirect taxes.

"We have to rationalise our taxation laws, we have to simplify them, we have to have a predictability in tax regime, a kind of certainty. These are things, which are required when it comes to taxation, then the investors would be interested in coming to our country."

He said administratively there was readiness to implement the GST. The Budget session, which is to take up the constitutional amendment Bill, is likely to be stormy.

Adhia reiterated that the shortfall in direct taxes to the tune of Rs 40,000 crore would be made up by robust collection in indirect taxes and the total tax collection target of Rs 14.5 lakh crore for the fiscal would be met for the first time in five years.

In the current fiscal so far, direct taxes have grown 11 per cent as against a 33 per cent growth in indirect taxes, he added.

Adhia said the income tax department was trying to widen its tax base as currently 3.5 per cent of total population pays the income tax.

Business Standard, New Delhi, 18th February 2016

Household debt up, but India still lags emerging-market economies: RBI

Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...

CA Online

Search This Blog