The Modi government has promised that the government will keep the taxes low if elected back to power. “I speak in terms of taxation policies… I’m quite clear in my mind that on two issues at least – we had a lot of good fiscal prudence and we brought the rates down – these are two areas, if we are in power we will continue the same glide path,’ said Jaitley at an event organized by Confederation of Indian Industry (CII). The promise of BJP is opposite to that of Congress which aims to increase taxes on middle class to fund the NYAY scheme.
The Modi government has increased the Income tax exemption limit from Rs 2 lakhs (UPA’s last budget) to 5 lakh rupees (NDA’s last budget). In five years, Modi government increased the exemption limit two and a half times. The government also simplified the corporate tax structure and implemented the GST to reform country’s complex indirect tax structure. The corporate tax on companies with turnover upto Rs 250 crores has been reduced from 30 percent to 25 percent.
After the implementation of GST, taxes on most daily consumer goods have gone down and the market is more unified. “In the last 20-odd months of the GST, except for cement that is because of affordability, every item of consumption has come down to 18% and 12% category from 28%. So, it is only a matter of time that the last one also comes down,” said Jaitley. So, if the Modi government comes to power the tax on cement could be rationalized to 18 percent from existing 28 percent.
Recently, Sam Pitroda, one of the most powerful people in the Congress party has admitted that the burden of the NYAY scheme will fall on the middle class. When asked whether taxes will not go up and whether the middle class will be affected by it, Pitroda said, “Taxes may go up but I do not think that’s a major issue”. Earlier, economist Abhijit Banerjee, the brain behind Congress’ NYAY scheme has admitted that the taxes on middle class would be increased to fund the scheme. In an interview with Rahul Shivshankar of Times Now he categorically said, “No NYAY without tax increase.” In another interview with Rajeev Dubey of Business Today he said that there is scope for direct as well as indirect tax increase. When Banerjee was asked what taxes should increase and what are the new taxes that can be imposed, he said, “Income taxes. In principle, there’s scope for wealth taxation and in some sense there’s scope for increasing GST.”
So, one hand BJP plans to reduce the taxes to increase the disposable income of middle class and on the other Congress wants to pull money out of their pocket. The leaders and brains behind the Congress party have made it very clear that they are not middle class. If the party wins 2019 general election, the middle class is going to suffer from tax terrorism.