The finance ministry is working on a strategy for raking in more revenue to gain the much-needed fiscal space in the budget.
The finance minister will look at unlocking almost Rs 4.5 lakh crore caught in the income tax appeal quagmire.
It has also set up an ambitious tax collection target of Rs 7.50 lakh crore, about 19% over the last year. As per the CBDT's Central Action Plan released on Monday – a copy of which is with dna – region-wise targets for appeals commissioners will be formed, appeals will be prioritised in four baskets and 90% of the cases in the first basket will be disposed of by the fiscal-end.
The department would ask its tax assessing officers need investigate the high revenue potential cases very properly so that the orders stand the test of judicial scrutiny.
"The idea is that a scrutiny assessment order must lead to substantial addition to disclosed income with initiation of possible penalty/prosecution proceedings and collection of significant portion of demand so raised by March 31, 2015," said an official from the tax department on condition of anonymity.
While these steps will bear fruit by the end of the year, as things stand now, Jaitley is indeed a sticky fiscal wicket.
All major macroeconomic indicators point at very limited elbowroom that he has. Fiscal deficit has now become an even bigger concern as it has already touched 45.6% of the budget target of this fiscal at Rs 2.4 lakh crore in May itself. This is higher than the 33% of the targeted amount in May last year. Core sector growth too has slowed down to 2.3% in May. The recent inflation is at a five-month high of 6.20% and food price inflation has also hit the roof.
Economists and experts, meanwhile, said in this exceptionally tough situation, the government and the BJP should utilise the budget for giving out a message as to what it plans to achieve, and also come out very clean on the current state of affairs of the economy.
"This is an exceptionally difficult situation. The government should use the budget as an occasion for laying down the action plan for the economy," said Rajiv Kumar, senior fellow, Centre for Policy Research.
Rakesh Nangia of tax consultancy firm Nangia and Co said, "I find Jaitley in a testing time as the government needs heavy tax revenue to contain fiscal deficit. With three months already gone in the current financial year, depending only on the tax revenue will be really difficult. However, one would really forward to whether there are steps to remove the procedural hurdles and bottlenecks hurting infrastructure sector. Simplification, removing bottlenecks and expediting development is the key."
Kumar said with a slew of measures Jaitley could still bring things on track.
"Any cut on the expenditure side is impossible. The government needs to increase the revenue and work on expanding the tax base. Super-rich need to be taxed and the government needs to identify those evading taxes through unfair means such as declaring themselves farmers, etc. Various services in the service sector, which contributes 60% of the GDP but 12% of taxes, need to be taxed. There has to be an overhaul of the direct tax administration system," he said.
Despite the constraints, the finance minister is likely to announce sops for the real estate buyers as the government is bullish on the plan for 100 cities. Experts too said that the housing needs a significant push. "Affordable housing projects, those catering to lower income group and economically weaker sections should have tax rebates. To increase the supply of affordable housing, 100% tax rebate should be extended to all affordable housing projects approved under the affordable housing scheme," said Sachin Sandhir, MD, Royal Institution of Chartered Surveyors, RICS, South Asia.