Panel suggests taxing farm income | india | Hindustan Times
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Panel suggests taxing farm income

Taxing agricultural income, bringing all non-essential services under tax net and revamping export promotion will check tax evasion.

india Updated: Feb 17, 2006 20:12 IST

Ahead of Union Budget, a Parliamentary panel on Friday suggested taxing agricultural income, bringing all non-essential services under tax net and revamping export promotion schemes to check tax evasion and widen tax base.

"With reference to persons having income from both agricultural and non-agricultural income, perhaps the time has come for the government to seriously consider fixing, in consultation with state governments, a threshold limit beyond which, the income of such persons from agricultural sources could be brought under the tax net," the Standing Committee of Finance said in its report tabled in Parliament.

The committee in its final report on widening the tax base expressed concern over tax evasion by people involved in non-agricultural activities such as trading in rural areas and suggested discouraging private money lending.

Observing that the contribution of service sector to tax revenues was disproportionate compared to the contribution to the GDP, the panel said all services, barring essential and basic ones, should be brought into tax net in one go.

The panel also recommended making a separate law for service tax, with clear definition of service components so as to avoid possible disputes between the Centre and state tax authorities and prevent double taxation of the same instance under state VAT as well as service tax.

Headed by BJP's BC Khanduri, the committee has former finance minister Yashwant Sinha, Venkaiah Naidu and Left leaders Gurudas Dasgupta and Chittrabrata Majumdar among its 31 members from Lok Sabha and Rajya Sabha.

Expressing concern over tax evasion, the committee said such practices make a serious dent in government's total realizable tax kitty.

The data furnished on misuse of export promotion schemes revealed that the amount involved in show cause notices issued during 2002-03 to 2004-05 was a mammoth Rs 3442 crore.

"The aspect of blatant misuse of various export promotion schemes is evident from the fact that the government has decided to withdraw the Target Plus scheme following the advice of the Committee of Secretaries," it said.

"The committee are, therefore, of the view that there is an urgent need to review all the existing export promotion schemes after obtaining necessary inputs from DGFT, DRI so as to make them evasion proof," it added.

The high-powered panel made a specific refernce to the import of luxury cars and observed that of the 499 vehicles imported till date, 61 were identified to have been misused.

"What is particularly disburbing to note is that import licences have been reported to be issued to non-existent of fictitious firms," it said.

Real estate transactions are believed to be a major area for creation of black money, the panel said, adding the high rate of stamp duty levied by states is also percieved to be a reason for undervaluation of property transactions.

The committee noted that a whopping Rs 98,614 crore was revenue arrears relating to taxes. This was almost 75 per cent of the total direct tax revenue realised during 2004-05.

On tax exemptions to educational and charitable trusts, the committee said that some of these organisations are run on commercial lines and inspite of earning huge incomes were outside the ambit of taxes.