Telangana government plans to tax rich more

HYDERABAD: In a bid to shore up its revenues, the TRS government wants to tax the rich more. Stating that those with high incomes can afford to contribute more to the exchequer, the state is mulling imposing luxury tax on services availed by them.
Apparently taking cue from the Union budget, in which a two per cent surcharge was imposed on the super-rich, the state government is planning to introduce a tax on luxury goods and services.The proposed tax comes in addition to an across the board increase in service tax announced by Union finance minister Arun Jaitely in the budget.
"There are rich who can pay more. It is not wrong to ask them to do their bit when the new state is in need of resources for development. So we are mulling a new tax," commercial tax minister Talasani Srinivas Yadav told TOI on Friday.
As a result, a visit to a spa or a resort, dinner at a swanky restaurant or watching a movie at multiplex and buying branded jewellery are going to get dearer. Shopping at malls and big textile shops is also going to be expensive. Healthcare too is unlikely to be spared as services at corporate hospitals are to be brought under the new tax net.
"The idea is to bring in a balance in the mechanism of resource mobilization wherein the poor can be saved from high tax rates by imposing a little extra burden on those who can pay," said the commercial taxes minister.
While he was not specific on the tax rates and modalities of levying it, Srinivas Yadav said the cabinet sub-committee on commercial taxes would meet to deliberate the issue.
"It is not only about increasing the revenue collection, but also about plugging the loopholes in the system. There are instances of shop owners and hospital managements not filing tax returns despite huge turnovers. We must find ways to plug these loopholes," said Srinivas Yadav, who heads the cabinet sub-committee.
While revenue collections are off the mark with the commercial tax department garnering only Rs. 18,000 crore as against the target of Rs. 26,863 crore, the government is looking at Yadav's proposal to impose more tax on luxury goods and services as an inevitable option. The minister, however, said the new tax would not be mentioned in the budget to be presented on March 11.
Telangana is set to follow the Andhra Pradesh tradition of keeping tax proposals outside the budget. The new tax is likely to be announced sometime after the budget session.
While the government is hoping to rake in at least Rs 300 crore from the new taxes, the domain watchers are skeptical about its effectiveness. They feel introduction of the new tax might give way for more corruption instead of helping in mobilization of resources.
"When the target is just Rs 300 crore, the cost of recovery may be ironically more than what you collect at the end of the day. Moreover, such steps would result in harassment of tax payers and corruption in the bureaucracy," said MV Rajeswar Rao, former secretary general of Andhra Pradesh Federation of Chambers of Commerce and Industries (Fapcci).
He suggested that instead of imposing new tax, broadening the tax base and improving compliance by an efficient recovery system would yield better results for the government.