Panel calls for tax on non-farm rural income

Parliamentarians cutting across party lines today called for taxing non-agricultural rural income, all non-essential services, plugging loopholes in export promotion schemes with an eye on checking evasion and urgently reducing exemptions.

They also called for fixing greater accountability on assessing officers and setting up of a national tax tribunal at the soonest.

In its final report on "widening the tax base and evasion of tax", the parliamentary standing committee on finance said the time has come for the government to seriously consider fixing a threshold limit beyond which income from non-agricultural activities like money lending, trading in produce is taxed.

The report, tabled in Parliament today, also advised the government to make it mandatory for all dealers of high-cost items as well as persons with very high regular spending to file annual information returns under Section 285 B(a) of the Income Tax Act.

It also urged the Centre to impress upon state governments to bring in rationalised and uniform rates of stamp duty for real estate transactions.

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

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

The 31-member committee is headed by the Bharatiya Janata Party's B C Khanduri and has among its members former finance minister Yashwant Sinha, Venkaiah Naidu, Left leader Gurudas Dasgupta and Chittrabrata Majumdar and members from both Houses of Parliament.

With regard to export promotion schemes, the data furnished on the misuse of such schemes revealed that the amount involved in show cause notices issued during 2002-03 and 2004-05 was a staggering Rs 3,442 crore.

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

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

The committee also noted that the amount of revenue arrears relating to the CBDT is a whopping Rs 98,614 crore, which is almost 75 per cent of the total direct tax revenue realised during 2004-05.