BJP looks at a tax-free Raj
Sep 19, 2013 - Sanjay Basak and Pawan Bali |
In a so-called "bid to transform the current Indian socio-economic scenario" and "provide relief to the middle class while boosting the industrial sector", the BJP is looking at a "revolutionary" five-point proposal to abolish all direct and indirect taxes (except customs duty to protect domestic markets), including income-tax, excise duties, service tax, sales tax, VAT and corporate tax, among others.
A think-tank, Arthakranti, had a series of meetings with the top BJP leadership, including Mr L.K. Advani and Mr Narendra Modi, to discuss the proposal. Even RSS chief Mohan Bhagwat has been briefed about the proposal. Instead of direct and indirect taxes, the think-tank has proposed to impose a tax like "say 2%" on every banking transaction.
While the BJP leadership, which is preparing its "vision document", is debating the proposal, the national spokesman of the think tank, Mr Deepak Karanjikar, claimed that "it will generate a revenue of Rs. 15 lakh crore" for the government. The proposal, incidentally, will take at least three years for implementation if accepted by the ruling party at the Centre. A draft parliamentary bill has also been prepared for the "new taxation system" by the think-tank. Some in the BJP are, however, sceptical about the proposal. "We are only looking at it at this juncture," a senior BJP functionary said.
As per the proposal, the transaction tax on credit accounts will be shared by the Centre, states, local authorities and the transacting bank. High denomination currency above Rs.50/- is proposed to be abolished. "Some 58% of the population pays Rs. 20/- a day so they will not be affected by this," said Mr Karanjikar.
Under the proposal, currency transactions will not attract any transaction tax. But, it is proposed, cash transactions above a level, say Rs. 2,000/-, will be deemed illegal. "If you buy anything, like a camera, above this limit in cash and if there is some problem with the product, you will not be able to enforce the warranty on it as the transaction will be considered illegal," said Mr Karanjikar.
The biggest challenge to this proposal will be that in most of rural India, there are no banks. But, Mr Karanjikar said, the think-tank is right now chalking out modalities for it. "The banking infrastructure will have to be made. Ultimately, even the Food Security Bill will not be implemented without developing the banking system. We are planning a plan looking at the Aadhaar system," he added.
Arthakranti said that its proposal will bring more transparency and tackle the issue of black money. "The removal of instruments of parallel economy, that is high denomination rupee notes, means increased traceability," it said. The proposal could bring down prices of products and services due to abolition of Excise, Services and Sales Taxes. This may enhance customer base and could boost industrial production. It will bring stability in business circles about the tax laws of the country. Currently, the income-tax department and various top MNCs are involved in litigation over tax issues. It will also save compliance costs of the corporates as they will not need to pay any taxes.
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