NEW DELHI: The mention of Part-B of the Union
Budget may not ring a bell in the common man's mind but it deals with something that probably concerns him the most- taxes. Alternatively, it is also something that will make Mr. Jaitley and his team burn the midnight oil. While taxes are the government's source of income, it also reflects key elements of its policy implementation. In this context, let us see how the Modi government has tweaked things as far as income tax and corporate tax are concerned.
Both personal income tax and corporate tax come under direct taxes which in the last budget together constituted 51.3 per cent of the total revenues, the government projected to earn in the current fiscal. A further breakdown shows that corporate tax accounted for 28.2 per cent of the revenue budget. Even as corporate tax still contributes the most to the government's coffers, the balance is significantly shifting under this regime.
During PM Modi's regime, the share of corporate tax to total revenues has come down from 34.45 per cent in 2014-15 to 28.18 per cent in 2017-18. On the other hand, the share of personal income tax in the same period has gone up from 21.35 per cent to 23.08 per cent, the highest in the last two decades. The contrasting trend is congruent to the government's broader policies as facilitating ease of enterprise and spreading further the income tax net have been parallel but equally strong pitches of the Modi government.
This trend is only expected to continue in Budget 2018. India Inc has been pushing Finance Minister Arun Jaitley to cut down corporate tax. Experts believe that with the US substantially cutting corporate tax, the minister will also need to keep India's tax rate globally competitive.
If the government actually decides to provide relief to the business class, it will have to do so while ensuring that it scores impressively in its attempt to widen the income tax base. A recent data revealed by the Income Tax department has revealed that just over 2 crore Indians, or 1.7 per cent of the total population, paid income tax in the assessment year (AY) 2015-16. Despite being an improvement from the previous year, the pool of taxpayers is hardly enough to handle the pressure of revenue requirement.
The government is already in a bit of a spot as far as revenue collection is concerned. Data released by the Controller General of Accounts showed that during the April-November period, revenue deficit stood at 152 per cent of the Rs 3.2 lakh crore full-year target, signalling that the government may also miss the revenue deficit target of 1.9 per cent of GDP for 2017-18. Add to that declining revenue collection from GST (Goods and Services Tax), which now subsumes all indirect taxes apart from customs, and the finance minister is posed with a tricky situation at hand.
Mr. Jaitley indeed is stuck in a three-way conundrum. One, he needs to provide relief to the corporate sector; Two, he needs to ramp up income tax collection without irking the salaried class ahead of the election year and thirdly, making sure that the government does not run into debt due to poor revenue generation. His report card on all these fronts will be out by mid-day of February 1.
Source: timesofindia.indiatimes.com