Oct 31, 2019
Revenue concerns for the government make immediate tax cuts tough
Abolishing dividend distribution tax, securities transaction tax and long-term capital gains tax on shares could burn a Rs 80,000 crore hole in tax revenue, making it difficult for the government to offer any immediate concessions. The government has already slashed corporate tax rates, foregoing Rs 1.45 lakh crore, and more tax concessions will have to be made up for by increasing income tax on the super-rich or cutting welfare spending, both of which are not feasible, a government official aware of the matter told ET. The benchmark BSE Sensex crossed the 40,000 mark on Wednesday, building on the big gains of Tuesday after reports that the government may abolish the three equity transaction-related taxes. There are limited options to absorb the revenue loss if these taxes are abolished, said the official, adding that welfare expenditure for schemes such as Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and MGNREGS cannot be cut, given weak demand and rural stress. The Reserve Bank of India said the country’s GDP growth will slow to 6.1% this year from 6.8% last year.