There is a lot more than the new Government can do to fill up the empty coffer it has inherited
Those hoping for a reformative Budget by the Narendra Modi Government have been largely disappointed. Fiscal discipline, a simplified tax regime with tax rationalisation, and drastic steps to curb black money, were missing. Drastic steps could have been announced to ‘whiten’ a large chunk of black money, giving the exchequer huge amount of fund.
This money could be utilised for national development, for creating employment opportunities, and generating extra funds, apart from reducing the fiscal deficit. Punishment waiver for those voluntarily declaring black money abroad could make easy the task of enriching the exchequer.
Small cuts in excise duty are absorbed by manufacturers through rise in ex-factory prices giving no practical relief to consumers. There should be fixed slabs for excise and custom duties, abolishing all additives like cess and surcharges. Whenever duty on a commodity is to be changed, slabs should be changed, so that effect of duty change may be available to consumers. Ad valorem system of duty imposition should be adopted for all commodities so that excise revenue can increase with price rise itself without requiring any hike in the duty structure.
Car manufacturing company Maruti Suzuki introduced a smaller version of its Swift Dzire to bring down cost through excise cut, because presently the rate of excise duty on cars is according to their length. Super luxurious mini cars enjoy the benefit of a low excise duty because of their length. Union Minister for Finance Arun Jaitley could levy differential rates of ad valorem excise duty on cars, according to their ex-factory price rather than linear dimensions. Since having a costly car has become a status symbol, these could be taxed at double the excise duty with less ex-factory price.
Subsidy regime is maintained only for populist and political purposes. In practice, it is hardly beneficial for the poor. Fiscal deficit, due to subsidies, result in price rise and inflation. This hurts the people much more than what the Government seeks to neutralised through the gimmickry of subsidy relief.
The Union Government should do away with dual pricing of lPG by having a uniform pricing policy throughout the country inclusive of all taxes. Subsidy on cooking gas should be gradually abolished by price hikes at regular intervals.
The Union Government should further save money by merging all public sector oil companies into a single company. Announcing the merger of 29 public sector banks into seven big banks is a welcome step.
Post card and inland letters, priced at 50p and Rs2.50 respectively, cost heavily at Rs7.18 to the exchequer. They are mainly used by business firms including chit-fund companies. Outdated inland letters should be abolished.
Even registered newspapers should have a mail tariff of one rupee instead of just 25p with actual mailing cost being Rs10.59. Rationalisation of foreign mail tariffs, with equal tariff rise for every additional 20 gram weight slab for air mail, and 50 gram weight slab for sea (surface) mail can bring additional revenue.
Costly schemes like the Mahatma Gandhi National Rural Employment Guarantee Act are sources of corruption. The Finance Minister has rightly announced a check on their misuse. A study team for all such schemes and plans should be constituted soon.
It is also time to abolish the Members of Parliament local Area Development Scheme which even the Planning Commission termed as a corruption-generating scheme.
Since political parties are not ready to accept the Central Information Commission’s verdict that they are accountable to the public under the Right to Information Act, there is no sense of indirect funding through Income Tax exemption. Also, Government funding to NGOs should be banned. Income Tax exemptions for charity and other such purposes should also be abolished. This will provide additional fund for the Government to spend on development purposes.
Gold import in India rose by 11 per cent in a year against a global rise of just three per cent. Only a maximum 14 karat gold for jewellery, with 10 per cent excise duty, should be allowed. Since most of the investment in gold and property is made out of black money, steps should be taken to transform currency circulation in banking transactions so that surplus currency may be like ordinary ‘paper' for all practical purposes. Higher denomination notes of Rs500 and above should be discontinued because such currency is used as black money to buy gold and property.