A parliamentary committee on Friday hauled up the finance ministry for fall in Tax:GDP ratio to 9.2 per cent in 2003-04 from 10.1 per cent in 1990-91, due to several reasons like reduction in tax rates and non-recovery of arrears amounting to Rs 68,477 crore (Rs 684.77 billion).
Expressing "grave concern" over the low Tax:GDP ratio in India compared to that in many developing countries, the Standing Committee on Finance said the distortion was mainly due to the fact that large number of prospective tax-payers are yet to be trapped and brought under the tax net.
"Ongoing tax reform as well as the country's commitments to various international agreements have resulted in reducing, sometimes complete removal of taxes," it said in a report presented in Parliament.
"The government efforts to augment the tax resources through various measures have not resulted in substantially increasing the revenue, which paints a pessimistic picture of the Tax:GDP ratio," it said.
Referring to the Fiscal Responsibility and Budget Management Act, the committee said even country like Brazil, which is at par with India on many aspects, actually doubled its Tax:GDP ratio.
"The government should make earnest efforts in order to achieve a higher Tax:GDP ratio," it added.
While asking the government to make all-out efforts to make tax administration assessee-friendly, it said, "tax evasion and perpetrators should be dealt with strictly."
"It is noticed that only a few thousand tax-payers file their returns with income above Rs 10-25 lakh (Rs1-2.5 million), though it is a frequent phenomena that lakhs and sometimes crores of rupees are spent lavishly on social occasions like marriages," the committee said, adding more revenue could be mopped up if steps are initiated to tap such resources.
The committee also said government should expedite the process of covering all the services except a very few basic and essential services, under the tax net.
It also observed that there were about 4,868 cases where arrear demand in each case is Rs 1.0 crore (Rs 10 million) and above, amounting to Rs 68,477 crore (Rs 684.77 billion) till March 2003.
The committee noted that 78 per cent of the tax revenue was locked up as arrears are from just 400 cases, which indicates the concentration of disputes with a few.
Criticising the "casual approach" of the government in revealing facts, it said "lakhs of cases are pending and that out of the stated 88,000 cases under direct taxes, arrears amounting to Rs 17,000 crore (Rs 170 billion) are undisputed and a target of Rs 7,000 crore (Rs 70 billion) has been fixed, shows the enormity of the situation."
"There should be no difficulty in realising the amount of Rs 17,000 crore, which is undisputed," it said asking government to gear up its machinery to recover the arrears.
The panel also asked government to go after persons, who had taken refuge under the Voluntary Disclosure of Income Scheme of 1997 to make their black money white, but did not file their returns subsequently.
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