New Delhi: Finance Minister P Chidambaram said on 29 April the improvement in tax-GDP ratio has given enough money to the Centre to vastly increase outlays.
The UPA government inherited a tax-to-GDP ratio of 9.2% that has risen to 12.5% in 2007-08. The ratio will be 13% in 2008-09, he said replying to the debate on the Finance Bill in Lok Sabha.
The improvement in tax-GDP ratio has been despite cut in customs, excise and in the current budget cut in personal tax rates, he said. More money was being given to the states and Central government outlays have been increased vastly.
The outlay for education in 2003-04 was Rs7,024 crore which in the current year is Rs34,400 crore. The outlay for health in 2003-04 was Rs6,983 crore that in the current year has gone up to Rs16,534 crore, he said.
Chidambaram said the way forward was not to increase tax rate but increase tax base. He also advocated fewer exemptions and review of exemptions periodically.
He said the decision to introduce a sunset clause for the seven year tax breaks for refineries commissioning after 1 April 2009 had led to a situation where three public sector refineries — IOC’s Paradip, HPCL-Mittal’s Bhatinda and BPCL’s Bina units — were not eligible for the exemption.
This is being corrected and refineries commissioning upto 31 March 2012 will be able to avail the tax breaks.
On tax breaks to exploration and production, Chidambaram said the notes to the Finance Bill had merely reproduced the Income Tax Department’s stated position in various tribunals and courts on the issue.
He said the interpretation of section 80IB(9), providing seven year tax holidays on production of oil and gas, by the tribunals and courts would be binding.
The dispute would be resolved in a matter of six months, he said.