Lok Sabha Question No. 938 (UNSTARRED), answered on 2017-07-21
Subject: Revenue Forgone
Ministry: FINANCE
Asked by: POONAM  MAHAJAN

(a):

## Direct Tax

Revenue impact of direct tax incentives was laid before Parliament for the first time during  Budget  2006-07  as  Annex-12  of  the  Receipts  Budget  2006-07  by  way  of  a Statement of  Revenue  Foregone.  Thereafter,  it  was  placed  every  year  before  Parliament from Budget 2008-09 to 2014-15. From the year Budget 2015-16 onwards, it has been termed  as  the  'Statement  of  Revenue  Impact  of  Tax  Incentives  under  the  Central  Tax System', since what is actually being analysed is the revenue impact. Therefore, amount of revenue impact of direct tax incentives has been estimated from financial year 2004-05 onwards and the figures for corporate sector, non-corporate sector, individual taxpayers is as below:

(in

₹ Crore)

| Financial Year (FY)   | Corporate Income-tax   | Non-corporate Income-tax   | Individual Income- tax   |
|-----------------------|------------------------|----------------------------|--------------------------|
| 2004-05               | 57,852                 | N.E                        | 11,695                   |
| 2005-06               | 34,618                 | N.E                        | 13,550                   |
| 2006-07               | 45,034                 | 3,013                      | 29,130                   |
| 2007-08               | 62,199                 | 4,779                      | 33,278                   |
| 2008-09               | 66,901                 | 4,354                      | 33,216                   |
| 2009-10               | 72,881                 | 4,845                      | 40,297                   |
| 2010-11               | 57,912                 | 6,173                      | 30,653                   |
| 2011-12               | 61,765                 | 7,145                      | 32,230                   |
| 2012-13               | 68,720                 | 5,909                      | 27,627                   |
| 2013-14               | 57,793                 | 4,482                      | 30,772                   |
| 2014-15               | 65,067                 | 4,320                      | 49,206                   |

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA

## UNSTARRED QUESTIONS NO. 938

TO BE ANSWERED ON FRIDAY, JULY 21, 2017 ASHADHA 30, 1939 (SAKA)

## REVENUE FORGONE

938: SHRIMATI POONAM MAHAJAN:

Will the Minister of Finance be pleased to state:

- (a) the total amount of revenue that has been foregone as a result of tax incentives for Corporate sector,  none-Corporate  sector, individual taxpayers and  charitable entities  under  the  Central  Tax  System  over  the  last  fifteen  years,  State,  category and year-wise;
- (b) whether the Government has devised a new methodology to calculate the revenue impact of tax incentives under the Central Tax system; and
- (c) if so, the details thereof?

## ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SANTOSH KUMAR GANGWAR)

N.E : Not estimated

| 2015-16    | 76,858   | 4,780   | 57,020   |
|------------|----------|---------|----------|
| 2016-17(P) | 83,492   | 5,850   | 74,184   |

Under the Income-tax Act, Charitable trusts registered under section 12A/12AA have been completely exempted from tax subject to certain conditions specified in the Act. Revenue Forgone for such charitable trusts have not been estimated. Further no state or category wise details are maintained, however, section wise details of revenue impact of direct tax incentives is presented before Parliament with Budget every year in the form of document titled, 'Statement of Revenue Impact of Tax Incentives under the Central Tax System. '

## Indirect Tax

The  details  of  revenue  foregone  due  to  indirect  tax  incentives  had  been  provided since  Budget  2006-2007  (starting  with  actual  figures  for  2004-05)  under  the  Receipts Budget.

The  figures  of  revenue  foregone  due  to  indirect  tax  incentives  during  2004-05 onwards of customs and excise duties is as below:

(in ₹ Crore)

| Financial Year   | Customs   | Excise   |
|------------------|-----------|----------|
| 2004-05          | 92,561    | 30,449   |
| 2005-06 (P)      | 127,730   | 66,760   |
| 2006-07          | 137,105   | 75,475   |
| 2007-08          | 153,593   | 87,468   |
| 2008-09          | 225,752   | 128,293  |
| 2009-10          | 1,95,288* | 169,121  |
| 2010-11          | 1,72,740* | 192,227  |
| 2011-12          | 236,852   | 195,590  |
| 2012-13          | 254,039   | 209,940  |
| 2013-14          | 260,714   | 196,223  |
| 2014-15          | 238,967   | 196,789  |
| 2015-16          | 69,259    | 79,183   |
| 2016-17 (P)      | 77,978    | 76,844   |

## P- Provisional

*Customs duty foregone less export credit related

(b) & (c):

No, there has been no change of methodology to calculate the revenue impact of direct tax incentives under the Central Tax System.

## Indirect Tax

Till  Budget 2016-17, revenue impact of tax incentives on customs and central excise side  was  estimated  by  taking  into  consideration  the  effective  rate  prescribed  under  any exemption  notification,  conditional  or  unconditional,  vis-à-vis  the  tariff  rates  prescribed under the First Schedule to the Customs Tariff Act, 1975 and Central Excise Tariff Act, 1985  respectively  or  under  the  Finance  Act  concerned.  It  had  been  observed  that  the above methodology resulted in over estimation of revenue impact of tax incentives, as it treated unconditional and conditional exemptions alike.

During  the  Budget  2017-18,  methodology  to  calculate  the  revenue  impact  of  tax incentives on the customs and central excise side has been modified wherein, the rates imposed  by  unconditional  notifications  have  been  considered  as  de  facto  tariff  rates. Accordingly, the revenue impact of tax incentives in central excise, has been estimated as the revenue foregone on account of conditional exemptions which granted reduced rates vis-a-vis the tariff rates (prescribed by Central Excise Tariff Act, 1985) or the de-facto tariff rate  (prescribed  by  unconditional  notifications)  and  the  revenue  implication  of  tax incentives on the customs side has been calculated as below,-

- (a) Sum total of revenue impact of tax incentives for all the chapters has been calculated from EDI data (after making corrective adjustments);
- (b)  From  the  sum  total,  the  revenue  impact  of  tax  incentives  captured  in  the  EDI  on account  of  certain  duties  which  are  no  longer  levied  viz.  Additional  Duty  on  Goods  of Special  Importance [GSIA]  (exempt  from March,  2006),  Additional  Duty  on  Textiles  and Textile  Articles  [TTA]  (exempt  from  July,  2004)  and  Special  Excise  Duty  [SED]  (exempt from March, 2006) has been deducted;
- (c)  From the amount arrived at (b) above, the total BCD and CVD impact of account of unconditional exemptions and exemptions for FTAs/PTAs/ITA has been reduced.
- (d) The revenue impact of tax incentives ascertained at (c) above for all the chapters has been extrapolated so as to reflect both EDI and non-EDI clearances.
- (e) From the amount arrived at (d) above, the revenue impact of input tax neutralization schemes  for  exports  has  been  deducted  to  arrive  at  the  final  revenue  impact  of  tax incentives.
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