House panel wants I-T exemptions revisited

The Parliamentary Standing Committee on Finance wants the government to study the usefulness of income-tax exemptions as it shrinks the tax base.

In its report to the Lok Sabha, the committee has said the exemptions leave scope for tax evasion and encourage unwarranted tax planning.

The report also talks about fake claims of I-T returns, outstanding tax arrears and evasion of service tax, and points out that officials collude with people who claim fake I-T refunds.

At the end of January 2006, outstanding arrears in the direct tax category stood at Rs 84,662 crore and indirect tax arrears around Rs 21,368 crore. Out of these, Rs 35,000 crore were from Mumbai, going back to the stock-scam cases of Harshad Mehta and Ketan Parekh.

Capacity addition not up to the mark
The Standing Committee on Energy expresses dissatisfaction with the progress of capacity addition in the 10th five-year Plan (2002-07) and wonders if the targets will be met in the last year.

The report expresses surprise that the government is sticking to its capacity addition target of 17,974 Mw, which is 53 per cent of the Plan target, in a single year.

The report observed that National Hydroelectric Power Corporation used just a little more than one-third of allocated funds during the 10th Plan. The committee has also questioned free power to certain categories of consumers.

FinMin under fire too
The standing committee on pricing of petroleum products has raised objections to the finance ministry's refusal to use oil cess for setting up a price stabilisation fund. It said such a fund would be a cushion in the event of volatile prices.

"The committee strongly disapproves of the negative approach of the Ministry of Finance on such a vital issue," the report said.

The committee has appreciated that the ministry is working out a mechanism for bringing domestic refineries, including private players, under the subsidy sharing net.

Unsatisfied by the government's action on charging import parity price for petroleum products, it said, "Pricing petroleum product on import parity basis alone is irrational and the government should scrap this method for a more realistic one".

The committee has said the duty incentives the petroleum product exporters get on crude they import should be withdrawn.

Incentives for securitised debt
The Standing Committee on Finance has recommended fiscal incentives for securitised debt to be listed and traded on stock exchanges.

The proposal, which is part of the Securities Contracts (regulation) Amendment Bill, 2005, is expected to boost liquidity by providing an exit option to the investors and increase the volume of funds for further lending.