Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: articles on VAT and GST in India :: cpt :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: due date for vat payment :: empanelment :: ACCOUNTING STANDARD :: form 3cd :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS
 
 
« Sales Tax »
 Sales tax staff protest against goods service tax council
 Income tax survey on city jeweller
 Service tax levy to weigh on upstream companies’ earnings
 5 pc tax on online sales awaits Cabinet approval
 Amendment to Additional Sales Tax Act unconstitutional: High Court
 Maharashtra will soon achieve Rs one lakh cr sales tax : CM Devendra Fadnavis
 CBEC chief bats for minimal exemptions for India Inc under GST
 Issuance of Free Sale & Commerce Certificate to Merchant Exporters
 Why model GST law does not give confidence to exporting community
 State governments tighten their grip on sales tax holidays
 Income tax dept charts plan to broaden national taxpayer base

Valuing good taxes
January, 12th 2012

Raising revenue for fiscal consolidation will require hikes in indirect taxes.

In drafting the Union Budget for 2012-13, the government will have to consider how to return to a path of fiscal consolidation. This is still a phase of expanding populist spending, but the fiscal space has shrunk greatly. Fiscal soundness must, therefore, involve reducing the waste in government expenditure. This will have to be accompanied by attempts to raise more revenue, whose share of GDP has shrunk in recent years. Raising revenue is complicated by two things: the fragility of the economy, and political constraints that make meaningful alterations to direct taxes difficult. The government will be forced, therefore, to examine indirect taxes and the central value-added tax, or Cenvat, in particular. The modal Cenvat rate before the Budget for 2008-09 was 16 per cent. That Budget cut the rate to 14 per cent; then the various VAT rates were cut by a further four per cent after the financial crisis of 2008 hit, as part of the first post-crisis fiscal stimulus. The Budget of 2009-10 took the cuts even further, taking the modal Cenvat down to eight per cent. Although the pressure to roll back the fiscal stimulus was considerable last year, Finance Minister Pranab Mukherjee moved the rate up by only two percentage points. This years Budget cannot afford to pause in its attempt to return to a pre-crisis fiscal path. Another increase in Cenvat by two percentage points, to 12 per cent, is what the situation demands.

In addition, those segments of each sector that are considered luxuries can afford the burden of a further impost. In most product categories, the highest end survives recessions better; demand that is robust is a better location for tax rate hikes. Special excise duties, thus, are a good mechanism for raising revenue, with minimum distortions to the economy. The question of how to define luxury goods should not be a problem: vehicles with engines above a certain cubic capacity, television sets above a defined size, refrigerators above a given number of litres. A tax on final products will avoid a cascading effect, which is particularly important when the economy is still subject to some inflationary pressure.


No one likes higher tax rates, and a period when the economic tempo has slackened is not ordinarily a time for raising taxes. If this newspaper is nevertheless recommending them, it is because even a higher rate of 12 per cent will be lower than the level that prevailed till 2008, because fiscal control is essential for returning to a higher growth path, and because it is evident that no substantial trimming of the fiscal deficit is possible without higher rates. In particular, the government is not anywhere near close to big-bang tax reform as could have been hoped. The goods and services tax (GST), planned for April 2010, is still nowhere on the horizon with Opposition-ruled states in particular reluctant to co-operate. The goal of raising tax revenue cannot wait indefinitely for the GST. In any case, even a GST regime that is revenue neutral on a 2008 basis would require higher tax rates.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Wholesale Silver Jewelry

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions