Jaswant may not have to change direct tax rates
New Delhi: Indian Finance Minister Jaswant Singh may not need to touch direct tax rates in his effort to eliminate revenue deficit by 2007-08 and bring down fiscal deficit to 2 per cent of the GDP, say reports. An analysis done by the ministry shows this is possible, provided the economy chugs along at the current pace of 7 per cent growth of GDP.

The calculations show that a focus on just three areas — reforms in tax administration, expansion of the service tax coverage and rates to the Cenvat rate of 16 per cent for goods and the introduction of a country-wide value added tax (VAT) to replace central sales tax — can potentially give all the revenue buoyancy that the economy needs. The analysis demonstrates that Singh does not need not play around with any of the direct tax rates at all, as the estimated tax collection from this sector, at the existing level of compliance, can lead to a tax-GDP buoyancy of 4.48 by 2007-08 from the present 3.5 per cent.
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