The Government is unlikely to go in for any hike in direct or indirect tax rates in the forthcoming Budget, but may initiate steps to widen the tax base by rationalising the tax exemptions.
"I do not think raising tax rates for resource mobilisation is an option anymore. We are not going to raise it. We will have to look at systemic changes in the machinery for enlarging tax base. Tax exemptions have to be rationalised and business process restructuring have to be carried out in the tax system," Mr K.M. Chandrasekhar, Revenue Secretary, said at the India Economic Summit here on Sunday.
He later told newspersons that Indian Council for Research on International Economic Relations and the National Institute of Public Finance and Policy have been asked to study the cost-benefits of various direct and indirect tax exemptions and come up with recommendations.
Mr Chandrasekhar hinted that there might be some lowering of indirect tax rates in the forthcoming Budget. The Revenue Secretary also highlighted that the share of indirect taxes in the overall revenues have come down from 35 per cent in 1990 to 17 per cent in 2006. However, the share of direct taxes in overall tax revenue of the Centre has grown from 19 per cent to 45 per cent during the same period.
He also said that the country's tax-GDP ratio was likely to touch 11 per cent this year as against a level of about 10.34 per cent in 2005-06 and 8.12 per cent in 2001-02.