All tax exemptions may be lifted

NEW DELHI: The government is considering lifting of all tax exemptions, move towards a single excise duty rate and extend service tax to more areas as part of efforts to improve the financial health in the medium term.
The policy measures are likely to be part of 10th Plan document being drawn up by Planning Commission, which would be submitted to the Prime Minister next month.
The medium term fiscal measures of the centre would be to eliminate all exemptions under corporate tax progressively, align Custom Duties with Asean levels and move towards a single excise duty structure.
Sources said government will also tighten the tax structure to phase out exemptions, especially to the small scale sector.
In fact, government is planning to eliminate all exemptions and concessions that distort the tariff structure of the country.
Comprehensive compterisation of income tax systems and universal usage of tax identification numbers in monetary transactions would be made mandatory for facilitating tax administration, they said.
The Centre would also broaden the service tax net to ensure buoyancy in revenue collection.
The government would also continue to implement the Expenditure Reforms Commission in progressively reducing fertiliser subsidy and elimination of petroleum subsidies.
The broad policy measures also envisage reduction of subsidies on fertilisers and petroleum, while reworking the targeted food subsidy schemes.
Official sources said the government is also considering improving the operational efficiency of public utilities like Railways and power sector units, to phase out the budgetary support and generate internal resources instead.
While emphasising implementation of a nationwide value-added tax (VAT), sources said the Centre and states would work towards integration of state level VAT with central VAT (Cenvat).
Apart from the policy initiatives at the central level, moves are also afoot to ask states to enact Fiscal Responsibility and Budget Management bills to cap borrowings and reduce the debt-GDP ratio.
Sources said this would also reduce the interest burden of states considerably and improve their fiscal health.
Privatisation of state PSUs especially the loss making companies and reduction in administrative and establishment costs are also on the agenda.
Reduction in staff strength through adoption of a policy of net attrition and constituting a pension and amortisation fund to make committed payments like terminal benefits and debt servicing are also being considered.