OTHERS

Some exemptions stay in Kelkar report

NEW DELHI, JULY 24. The second report of the Kelkar Committee, dealing with direct and indirect taxes, has maintained its original recommendation of three tax slabs for income tax along with abolition of all exemptions except those relating to housing loans, senior citizens and women.

Called the Task Force on Fiscal Responsibility and Budget Management Act and headed by Vijay Kelkar, Adviser to the Finance Minister, P. Chidambaram, the report suggests that the income tax slabs be altered to have a zero tax rate on income up to Rs. 1 lakh annually, a 20 per cent rate for the next slab of income between Rs. 1 lakh and Rs. 4 lakhs and a 30 per cent rate on incomes above Rs. 4 lakhs.

At the same time, exemptions under Section 10A, 10B, 80(1) A and 80(1) B have been recommended for abolition.

For corporate tax, it has been recommended that the rate be brought down from the current 35.875 per cent to 30 per cent and all exemptions granted till now be "grandfathered" for old units with no exemptions for new ones.

In the case of indirect taxes, the panel has recommended three rates as Goods and Services Tax, commonly known as Value Added Tax.

The floor rate for the Centre has been suggested at six per cent and for the States four per cent; the standard rate at 12 per cent for the Centre and eight per cent for the States and the higher rate of 20 per cent for the Centre and 14 per cent for the States.

However, the panel has favoured the standard rate structure.

In the case of customs, the recommendation is for a three-rate slab of five per cent, eight per cent and 10 per cent.

Moving to such low rates would entail certain loss of tax revenue, the panel has noted.

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