The Finance Bill for 2006 has already been passed within the first phase of the Budget Session of Parliament. Finance Minister P Chidambaram tried to corner all the credit for the eight per cent GDP growth for the year 2005-06 and the fact that his Budget did not impose much tax burden on the the much-touted common-man. But in his Budget speech, the Finance Minister had talked about the ill-effects of a plethora of excise and customs excise exemptions which , according to him, had outlived their utility.
With the Budget having been passed and the attention diverted to many other mundane issues, the Finance Ministry put out on its web-site a rather innocuous announcement. The government wanted a public reaction to its proposals to do away with scores of excise and customs exemptions. The public notice is drafted in such a way that you cannot make out anything on its main page until you reach a heading which says ??List of exemptions proposed to be withdrawn??.
One look at this list and you think ??My God it reads like a full-fledged Union Budget??. The implications would obviously be on the lines of a Budget. If the government had its way and the proposal to withdraw excise and customs on a large number of goods is put into effect, items of daily use including tooth powder, pencils and parts of pens, sports goods, bicycles, kerosene pressure lantern, wheeled toys, dolls will cost sizeably more.
Even the airfare by airlines may have to be revised, as the government plans to withdraw the excise exemption to the aviation turbine fuel. The aircraft fuel used by the domestic airlines is, in any case, subjected to a heavy burden of State taxes.
Accredited journalists who had plans to bring in personal computers from their next foreign visits will have to pay because the the lap tops upto Rs one lakh without any customs will have to pay duty on their imports. Till now, the journos had enjoyed this privilege, which this government does not like them to have any more. Excise duty exemptions enjoyed so far by fuel, surgical rubber gloves or medical examination rubber gloves, tyres, flaps and tubes used in the manufacture of power tillers, mosquito nets impregnated with insecticide, stoneware, which are only salt glazed and rough opthalmic blanks, for manufacture of optical lenses will also be withdrawn.
With the proposal to roll back the tax exemptions on things like mathematical boxes including geometry boxes and colour boxes, parents will have to shell out more for the kids? stationery.
?Government has identified a number of exemption notifications which can be removed,?? an official statement said. Finance Minister P. Chidambaram had made his intentions known in his Budget speech, the statement added. Exemptions, according to the FM are bad for the economy and he does not like them. Let'shear out some-one else, who mind you is neither the interested party enjoying these exemptions, nor the Opposition NDA parties.
?The first question is if there is any country at all in the world that does not provide tax incentives via exemptions; second question is how to put a value on the economic benefits that flow from such exemptions; and the third is whether India overdoes the inventives. It cannot be the case that governments all over the world are foolish??, said the prestigious think tank National Council of Applied Economic Research (NCAER).
Both experience and professional literature, the NCAER argues, are suggestive of the fact that tax incentives have an important role to play. ??That they result in revenue losses is obvious. The real question is what does the economy gain.Some of the tax exemptions may have led to more output and hence more tax revenue??.
Well, to understand the NCAER point of view you need to have an FM who has foresight and is willing to listen to some expert advice. But Shri Chidambaram thinks he is the last word on the economy!. Actually, Shri Chidambaram is the last word because he is the Finance Minister !