The combined impact of the two reports of the Kelkar task force would leave the Centre poorer by about Rs 4,000 crore (Rs 40 billion) in the short run.
The task force on direct taxes has estimated that on balance the revenue department would lose nothing if the entire package were implemented.
But on indirect taxes the combined impact of the lower duty on petroleum and the 4 per cent reduction in special excise duty on motor cars, soft drinks, air conditioners and tobacco preparations would set the Centre back by Rs 4,000 crore (Rs 40 billion) for which there are no offsetting gains.
But government officials said this was the worst-case scenario as it does not take into account any growth in petroleum consumption.
Besides as the beneficial impact of the reduced rates of indirect and direct taxes would kick in, the deficit should be wiped out.
They also said it was not only the revenue considerations that weighed with te committee on the graded reduction special excise duty.
Instead if the rates had fallen to 20 per cent from 32 at one go, the bottom for the market for consumer durables like cars would have dropped out, as people would have simply stopped their purchases for the next couple of months till the new rates came into force that would have slashed car prices dramatically.
The revenue neutrality of the task force on direct tax is built on a significant assumption that there would be no zero tax companies and all of them would pay at the rate of 30 per cent.
According to an analysis of 1,334 companies made by the revenue department the total collections would jump by Rs 10,762 crore (Rs 107.62 billion).
Along with the new 20 per cent tax on mutual funds expected to yield Rs 1,500 crore (Rs 15 billion), it would neutralise the impact of giveaways of Rs 12,228 crore (Rs 122.28 billion) on personal income tax including about Rs 7,284 crore (Rs 71.84 billion) for change in income tax rates.
It has also estimated the impact of nil taxation of dividends at Rs 1,500 crore based on the figure for 2001-02.
However since that was a recessionary year, the sum was on the lower side.
