Submission of final Kelkar report on indirect taxes postponed

NEW DELHI: The submission of Kelkar panel''s final report on indirect taxes, which was scheduled for Thursday, has been postponed as Finance Minister Jaswant Singh is unwell.
Official sources said that it would now be submitted on Friday along with the report on direct taxes.
The Kelker Task Force on tax reforms, which has already submitted two consultation papers on direct and indirect taxes, is expected to water down some of its recommendations in the final report, particularly on income-tax pertaining to incentives for housing loans in the face of widespread criticism from within the BJP.
The report on direct taxes is likely to recommend tax deduction of up to Rs 50,000 or Rs 75,000 for mortgage interest on housing loans as against the present eligibility of up to Rs 1,50,000 per year, the sources said.
This middle path was being adopted keeping in mind the flak the government had received at the hands of the BJP and the middle class, sources said.
The task force had originally suggested doing away with this exemption on housing loans in one go or in three years by reducing the exemption limit by Rs 50,000 every year.
For the salaried class, the tax exemptions on savings is likely to be phased out keeping in mind that the exemption limit for personal income-tax was suggested to be raised from the present level of Rs 50,000 to Rs 1 lakh per annum, the sources said.
Singh had also told the recent BJP National Executive meeting that some of the thorns in the Kelkar committee recommendations would be weeded out and some suggestions of the Rajnath Committee would be incorporated.
Apparently, there is strong resentment against imposing Agriculture Tax and hence Kelkar would confine himself to the original proposal to make a beginning by taxing agriculture income of only non-agriculturists.
With strong opposition from the party, the Kelkar panel, while suggesting adopting the big bang approach in simplification of tax rules and procedures, is likely to recommend phased elimination of a plethora of exemptions in both direct and indirect taxes.
On some of the sensitive issues like housing loans and savings rates and infrastructure and small scale industries, the exemptions might be retained but at reduced levels, the sources said.
Besides, some of the setoffs for income between Rs 1 - 2 lakh are expected to be retained, the sources said, adding it is very unlikely that there would be any going back on the proposal to abolish Minimum Alternate Tax for corporates.
On indirect taxes, the sources said the proposal to move on to a two-tier Customs Duty of 10 per cent for raw material imports and 20 per cent for finished goods imports would be retained and the only difference is that it would suggest that this two-tier rate should be effected in two years by bringing down the present average customs duty of 30 per cent on finished products to 25 per cent in the coming year and then 20 per cent in the subsequent year.
Likewise, the import duty on raw materials is expected to be brought down to 15 per cent in the coming year and then to 10 per cent in the subsequent year.
On the Excise front, the recommendation of two-tier duty of eight per cent for food products and 16 per cent for all other items with separate rates for agriculture products and tobacco are to be retained, the sources said, adding the rationalisation of incentives for exports would continue besides the concessions for Special Economic Zones.