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Economic Advisory Council to the Prime Minister (EAC-PM) Chairman Bibek Debroy on Wednesday said the accretion of fresh non-performing assets (NPAs) of public sector banks (PSBs) had virtually stopped.
Participating in a discussion on the Union Budget, Debroy said it was possible to scrap income tax and other direct taxes and replace them with indirect taxes, but indirect taxes could never be progressive.
Referring to the issue of low income tax collection, he said it was mainly because farm income was not taxed in India.
Debroy also regretted that not many experts argued in favour of taxing farm income, at least above a certain threshold.
However, according to recent Reserve Bank of India data, bad loans of PSBs stood at Rs 7.34 trillion at the end of second quarter this financial year, a bulk of which came from corporate defaulters.
Replying to a query on direct taxes, Debroy said that it was perfectly possible to scrap income tax and other direct taxes.
“Although in poor countries like India, it is easier to monitor indirect taxes. But indirect taxes can never be progressive," he noted.
Referring to issue of low income tax collection, the chairman of EAC-PM said, "One reason is that the number of personal income taxpayers is so low is because the rural sector is completely out of purview of income taxation. It is a state subject, so the Union government can not do anything.”
“But the the question I am asking is how many of us are arguing that tax should be levied and if such a tax is levied, then obviously, it should be levied above a certain threshold,” he stressed while referring to farm income taxation.
Debroy also said that fiscal profligacy had its cost.
He pointed out that fiscal deficit for the current financial year was higher because the goods and services taxes (GST) could be counted only for 11 months. “Had it not been, fiscal deficit would have been closer to 3.2 per cent of GDP this fiscal,” he stressed.