The Rajnath Singh Committee, chaired by former Uttar Pradesh Chief Minister Rajnath Singh, was formed by the Bhartiya Janata Party to gives its comments on the recommendations of the Vijay Kelkar task force on direct and indirect taxes.
The Rajnath Singh committee came down heavily on some of the suggestions put forward by the Kelkar panel in its report to the government, though it agreed with some other suggestions too.
The Rajnath Singh committee says that in the process of simplifying tax administration, the Kelkar panel may have overlooked much broader objectives of the taxation policy.
The committee says that it appears that the welfare objectives of the government, especially towards the weaker sections, lower middle class, senior citizens and women have been overlooked.
More over, certain proposals, if accepted, would mean undoing of many developmental and social welfare measures initiated by the very NDA government, which constituted the Kelkar task force.
A brief synopsis of the Rajnath Singh committee report
Points of agreement with Kelkar report:
Modernisation of tax administration: The BJP supports the various measures recommended by the Kelkar task force to simplify and modernize tax administration in order to provide hassle-free service to the tax payers and ensure better tax collections.
Raising of Income Tax exemption limit: The party welcomes the proposal to increase the exemption limit of Rs. 1 lakh in principle. However, the exemption limit may be raised in phases keeping in view the prevailing fiscal situation.
Senior citizens and widows: The party welcomes the proposal to raise the Income Tax exemption limit by additional Rs. 50,000 for senior citizens and widows.
Abolition of dividend tax: The proposal to remove tax on dividend at the hands of the recipients may encourage lakhs of small investors. It may also give the much-needed fillip to investment. However, the party would like to suggest that dividend distribution tax may be re-introduced at the hands of companies.
Reduction of multiplicity of rates of customs and excise: The proposal to reduce the number of slabs in excise and customs duties is a right step. Similarly, the proposal to charge lower duties on raw materials and higher duties on finished goods would encourage domestic manufacturing sector, leading to enhanced employment opportunities.
However, there is a need to give close attention to the classification of raw materials and finished goods and application of slab rates to ensure that domestic industry is protected to the extent feasible.