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Can abolition of income tax ever be a reality in India? Doubt it


Can abolition of income tax ever be a reality in India? Doubt it
It's not such a bad idea to dangle a carrot just a few months before elections. It's even better, if it talks of complete abolition of Income tax, sales and excise duty.

Now, there is another grandiose tax abolition (or maybe rationalisation or substitution) plans, just before the elections. According to a PTI report the Bharatiya Janata Party (BJP) favours abolition of income, sales and excise tax and the party may include it in its vision document to be unveiled ahead of general elections next year.


Former BJP President Nitin Gadkari, who is in charge of preparing the party's vision document, 'India Vision 2025', said that the party is deliberating the matter.

"We were talking about tax and although we have not decided as yet...there is a suggestion of complete abolition of income, sales and excise tax," he said at a function on political agenda of political parties.

The PTI report quoted Gadkari as saying, "If we abolish these taxes and if we apply around 1 or 1.5 per cent of expenditure or transaction tax, then we will get revenue to the tune of around Rs. 40,000 lakh crore. So those 3.5 lakh people who are using beacons of various colours now, they will not be required anymore as no tribunals or commissioners will be required," he said.

It's difficult to be critical of what the grandiose BJP plan is, since there are no details. But, one must understand that sales tax is also a state subject. Just as the Congress found it difficult to implement the GST, because of opposition from certain BJP ruled states, the BJP might find it difficult to build a consensus for this grandiose tax plan.


For the last several years, a wonderful tax Plan like the Goods and Services Tax (GST), if ever implemented, has got stuck due to political opposition. The GST was estimated to boost GDP by at least 1-2 per cent, but, faced all kinds of hurdles. Several reports have called the GST a landmark reform, which would be more tax efficient, ensure compliance and reduce administration handicaps.

The government wanted to roll out GST in April 2010, but, has been stuck due to opposition from the state governments.

Another landmark tax reform the DTC, was first introduced in parliament in April 2010. After that it has been on the drawing board for the last couple of years. According to a report in the DNA Finance Minister P Chidambaram is trying his best to build consensus around the bill.

How difficult has it been to build a consensus around the pension regulatory bill, insurance bill, GST Bill and the DTC most of us are aware. Don't forget the non economic bills like the Jan Lokpal Bill and the Women's Reservation Bill.

First, the BJP has to build a consensus around its grandiose tax plans. After that it has to be deliberated and passed in parliament, which hardly functions. Today is the fifth consecutive day in the Winter session when parliament has not functioned.

It's good to highlight complete Tax abolition just before the elections, but, is it ever going to be implemented. Even an eternal optimist would be cynical.

Read more about: income tax sales tax excise
Story first published: Saturday, December 14, 2013, 9:27 [IST]
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