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Scope for expansion of direct tax base in Budget
March, 01st 2012

Dr Rupa Rege Nitsure, Chief Economist of Bank of Baroda, feels that there is a scope for expansion of direct tax base, and she does not see any scope for lowering of direct tax rates in the upcoming Budget.

To get the views of the industry on Budget expectations, Business Line had posed some questions to Dr Nitsure.

She said that given the extent of revenue shortfall during 2011-12, there is definitely a scope for expansion of direct tax base. Some minor changes may be effected in income-tax exemption limits to improve the tax collections, she said.

Direct tax code

While there are doubts whether the DTC (direct tax code) will progress as planned, some tax initiatives under the existing code should be forthcoming. However, I dont see any scope for lowering of direct tax rates in the upcoming Budget, she said.

Goods and service tax

Asked about the approach of the Government to GST (goods and service tax), she said the GST will definitely be delayed, as it is still not ratified by nearly half of Indias 28 states, in addition to a two-thirds majority in Parliament.

But there is a possibility that the Government may soon release the draft GST law for public comments to reaffirm its intentions. The announcement for the same is likely to be made in the Budget.

Service tax net

Asked if more of services would slip under tax coverage, Dr Nitsure replied in the affirmative. The Government is likely to bring all services, except for a short negative list, under the tax net in the forthcoming Budget. For example, services like air-conditioned travel, beauty parlours, etc. will now be covered under the service tax net, she said.

Fiscal deficit

To a query on whether the Finance Minister will be left with any elbowroom to propose a fiscal deficit any lesser than what actually transpires in the revised Budget, she said given that all major international rating agencies have issued a warning in recent weeks that Indias sovereign rating and ratings outlook going forward will depend upon the Governments efforts towards fiscal consolidation, the Government is likely to peg its fiscal deficit to GDP ratio at around 5 per cent to 5.2 per cent for 2012-13 in the upcoming Budget.

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