Ahead of his maiden Budget, Finance Minister Arun Jaitley Tuesday said tax exemptions given to industries are necessary and it does not amount to favouritism by the government. He also made it clear that fiscal deficit needs to be maintained at an acceptable level through expansion of economy and tax buoyancy rather than contracting expenditure.
Replying to a question in Rajya Sabha on whether the government would revisit exemptions given to corporates as the revenue forgone was more than the fiscal deficit, he said “revenue forgone is not a factor which is taken into consideration when fiscal deficit is calculated”.
“Revenue forgone does not mean that at its whims and fancies a government decides not to charge some people revenue. But there are industries to which legitimate exemptions are given. There are citizens to whom exemptions are given. Supposing senior citizens are given an exemption. Now do you want us to remove those exemptions and ask them to pay more and then say that this is revenue forgone?
“Now, all kinds of exemptions which are given under the Income-Tax Act are given to incentivise a particular industry. Recently, when manufacturing growth for two years has fallen flat, the interim Budget granted exemption to the manufacturing industry. I have continued that exemption further. Now is that revenue forgone or is that an attempt to give a fillip to the industry? So, it is not a case where favouritism is shown and that you are not collecting legitimate cases,” he said.
The Left parties have been asking the government to end the practice of giving tax exemptions to corporates. Jaitely’s reply came to a supplementary question by CPM member P Rajeeve.
Jaitley, however, said tax collection drive will be intensified and there will be no laxity shown to those who owe taxes.
As far as fiscal deficit is concerned, he said there is no disagreement on the fact that fiscal prudence is required and fiscal deficit is to be maintained at an acceptable level.