Rajnath panel report to impact Budget

The Rajnath Singh committee report is likely to have a bearing on the Budget-making exercise. Rajnath Singh also called on Union Finance Minister Jaswant Singh and discussed the issue with him.

After long deliberations, which witnessed serious debates within the Bharatiya Janata Party on the Vijay Kelkar Committee's recommendation for tax reforms, BJP general secretary Rajnath Singh had on Monday submitted an eight-page report to BJP chief M Venkaiah Naidu.

Rajnath Singh, former Uttar Pradesh chief minister, headed the seven-member party panel set up to study the political impact of the Kelkar panel report.

Though the party has decided not to make the report public, at the moment, the finance minister is reported to have expressed his approval over the manner in which the Rajnath Singh panel firmed up its views in consultation with Kelkar, adviser to the Union finance minister, and officials of the ministry.

The party panel report is believed to have endorsed the recommendation of the finance ministry's task force for toning up the tax administration and proposals on the indirect taxes.

But the panel has unanimously rejected the proposal to impose a tax on the agriculture income.

Singh said the committee was not in favour of it because agriculture formed the backbone of the country's economy and it was not fair to tax them.

But the committee veered around the view, despite opposition from within the BJP, that the shareholders be exempted from paying tax on dividends.

A suggestion by former BJP economic cell chief Jagdish Shettigar to re-impose dividend distribution tax could not find favour with majority members, sources say.

A member of the committee said, the Rajnath Singh committee had made recommendations only after assessing the political impact of the Kelkar report and suggested that the exemptions linked to incentives must not be tinkered with as it would have an adverse political impact.

But the committee had endorsed the Kelkar panel suggestions to spruce up the tax administration and its restructuring to enhance tax realisation.

The panel has favoured raising the income-tax exemption limit without removing the standard deduction for salaried class.

"The party president would give it to the finance minister to be suitably incorporated in the Budget 2003-2004," Singh told reporters.

Meanwhile, party sources felt that because the government wanted to encourage the housing sector and had for the purpose disbursed Rs 17,000 crore (Rs 170 billion) last year and Rs 37,000 crore (Rs 370 billion) for 2002-2003, it was not proper to implement the Kelkar panel suggestions.