What is Revenue foregone?
'foregone'' is a little bit of an ambiguous phrase which creates an incorrect impression.
PARTICIPATING in the debate on the Finance Bill 2014, yesterday several Members in the Rajya Sabha spoke about the huge Revenue foregone - about 6 lakh crores.
Ms Nirmala Sitharaman explained, "I would like to just give you specific details there. Direct revenue foregone figures are: direct taxes-Rs. 1.16 lakh crores, indirect taxes-Rs. 4.55 lakh crores. These are absolutely notional figures of revenue, not collected and not given aways. In indirect tax, revenue foregone of Rs. 4.55 lakh crores is due to levy of tax at the rate lower than what is approved by the Parliament. Indirect tax revenue foregone is not for the benefit of corporate, but for the benefit of common man.
I just want to inform the House that indirect tax revenue foregone comprises of the following:
• SSI exemption schemes -- No excise duty up to clearance value of Rs. 1.5 crores within a financial year.
• Area-based exemptions exist in the North-East States, J & K, Uttarakhand and Himachal Pradesh.
• Supplies to Defence sector are exempted from excise and customs duty.
• Crude petroleum is exempted from customs duty. The tariff rate is about 10 per cent.
• Free Trade Area Agreements are exempted
• Export promotion schemes are exempted.
So, all these cannot be withdrawn."
Mr.Arun Jaitley explained:
The Budget gives an exemption which is not a tax foregone. For academic reason it is written like that. Suppose the rate of tax is 60 per cent, but at that time the bound rate or the applied rate is 30 per cent; so, 30 per cent, which is the head space, is tax foregone. It does not mean that it is a concession to the corporate because if you had made the tax or excise duty on the commodity at 60 per cent, probably nobody would buy that product. Therefore, nothing would come back to you. The product itself will become costly. So, ‘foregone' is a little bit of an ambiguous phrase which creates an incorrect impression. But, these are conscious efforts to revitalize the economy, which, Governments, from time to time, give.