[RaghuVis]

I am starting something that might become a hot topic so request members to not stray and turn it political.

Whatever spectrum of political leanings all members might belong to, one thing has to be accepted by all that fuel prices are hurting people heavily. The Ukraine war has further hurt all of us. With central governments and state governments busy blaming each other for the current situation, I keep wondering if we will ever get a solution.

So keeping that in mind, I have a simple question -- given a choice (unlikely but let's assume we are Anil Kapoor/Arjun Sarja --getting to be CM for a day), which option could you take?

Option 1 --> Reduce tax on fuel
Pros
-- Instant relief for all.
-- Reduction in central taxes will lower fuel prices further due to state tax calculation methods

Cons
-- Revenue loss for the government. How much ever-corrupt politicians are, end of the day all these infra expenditures that we see today is from these source of revenues
-- If the center lowers taxes, states will increase to take the buffer and if states lower taxes, the center would do the same.
-- In a country like India, only 3 crores out of 135 crores pays Income tax. There is a huge section of the public who still do not pay (Illegally) any tax and still enjoy all the perks. There is a sentiment that why should they enjoy further perks?

Option 2 --> Reduce Income Tax
Pros
-- Give relief to those who are paying taxes and not evading. Gives a sense of content to the tax-paying public that their contributions are being acknowledged.
-- Lowering tax slabs might help more people to start declaring their assets.

Cons
-- A huge section of Indians don't pay taxes. So, not much relief for them.
-- Corporates/Businessmen will NOT be happy.

So, which choice would you take?

Mods: Please merge if there are other similar topics.

[adisan]

Reduce fuel taxes. Rising fuel prices not only has a direct impact on fuel expenses, but also an indirect impact where the prices of many things including groceries goes up. Having said that, it is unclear whether the prices of indirectly impacted items will come down if fuel taxes are reduced.

[Sourav13in]

In my opinion, reduction in fuel taxes will help us more. With my little knowledge of economics, I can safely say that fuel prices directly impact prices of all commodities.
Hence, reduction in fuel prices will benifit us not only in terms of savings in commutation but also transpire into reduced commodity prices.

[Ragul]

SuSwamy used to talk about abolishment of Income Tax but it has its own challenges. I have a slightly different idea. Currently we have a regime of double taxation - you pay tax on salary, then you pay tax on bank interest, pay tax when you invest in MF, pay tax again when you buy petrol with money for which you have already paid the tax from your salaried income … this is very unjust and unfair.

I think Salaried personal Income Tax payers should receive an annual credit refund from the IT department based on their IT returns where people submit a statement of some transactions for which GST has been paid using UPI or other electronic means (incl., payments at fuel pumps). Thus if your total GST payments amount to 50k in a year and you have paid Income Tax of say 2lacs (just a hypothetical number) you are entitled to a GST refund of say 30k based on some calculations assuming a non-zero tax regime. Successive governments can revise the calculations to provide added benefit as the state of the economy and financial situation permits over the coming decades. To begin with this benefit can be provided only to the lowest Income Tax slab bracket group to make their life easier, or only up to a limit under the 1st slab, that all taxpayers can take advantage of.

The calculations and formula could be transparent with a set format and form for listing all GST payments for the financial year, making it easy for tax payers when they file their returns.

[mayankk]

As a minority in India, of being an income tax payer, I say, drop the IT rates. Why should only I, in a minority, suffer for the sake of non-tax payers.
Fuel tax is universal, it will affect everyone. Raise it the hell away! Eventually people will realise they're trying to store water in a sieve.
If 9 Cr IT payers shout about tax, no-one will listen. 130Cr shouting will definitely bring down castles.
Maybe that will drive authorities to take care of Spend, rather than Collection.

[deehunk]

I suggest a new method of proper utilization of tax payer's money, let the taxpayers be covered under a policy of pension or superannuation relative to the amount of tax paid, this is in addition to the existing EPF policy. This way all tax payer will have additional social security incase of job loss, retirement or bereavement.

[wildsdi5530]

To put things in a right perspective,

If tax on fuel is reduced/ abolished, the revenue deficit will have to be recovered from Income Tax. Unfortunately even if increased to ~100%, that may not make much of a mark.

It Income Tax is reduced/ abolished, the coffers will not be really affected. maybe a 50ps increase in fuel and other taxes. Politically it may not get any mileage, the 3% income tax payers have no value in India. But ethically it would be the right thing to do. This double taxation at source and exit should go.

Direct taxes, which comprise income tax paid by individuals and corporate tax, came in at Rs 14.10 lakh crore during April 2021 to March 2022. Now a huge chunk of this would be given back as tax refund. And corporate taxes though lower rate is still a big chunk. So Probable revenue after deductions from personal Income Tax is probably 2 Lakh Cr.

The collections on petrol and diesel rose to ₹2.94 lakh crore in the first 10 months of the current fiscal (2020-21) according to information furnished by Minister of State Anurag Singh Thakur.
He said taxes collected on petrol, diesel and natural gas as a percentage of total revenue have gone up from 5.4 per cent in 2014-15 to 12.2 per cent this fiscal.. This statement is considering only central tax component. Add State taxes and excise and cess, etc. the amount could easily cross 10 Lakh Cr.

One big disadvantage of removing Income tax is that there is a huge infra and personnel who have nothing else to do, 46,000 babus in 2016. They will be out of a job and also so many IT buildings will have to be repurposed. They will definitely not like it. Fuel tax cut on the other hand is only a digital announcement.

[vedirah]

In my opinion reducing fuel tax is the better option for two obvious reasons:

1. Fuel cost directly affects cost of commodities in the market.

2. The second and more important aspect is the fact that if you're paying income tax, you are already rich enough to afford a middle class lifestyle. In India almost 70% of the people earn less than 15k monthly household income. They don't pay taxes because they can't afford to pay taxes. However, cost of commodities directly affects their purchasing power. A lower purchasing power of majority of the population means higher inflation. Thus, reducing tax on fuel will help the under privileged section of the society.

In my opinion, we should tax the rich more than we are already doing. This increased revenue from income tax can be passed on as a benefit in lowered GST rates. However, in a capitalist economy this comes with an undesirable side effect - the more you tax the rich, the less they are ready to invest in the economy. They will start looking for other avenues, even other countries.

[deetee]

Even a non tax payer pays lot of indirect taxes. Tax payer also pays those indirect taxes. Tax evaders (cash parties) also cannot escape paying some indirect taxes especially fuel tax.
So, my vote would be to keep the fuel tax and reduce/remove income tax. After so many multilevel indirect taxes still asking to pay income tax is ridiculous.

However, income tax is something controlled and collected by central government while states have a share of fuel tax also. So, the lack of collaboration between central and state (even more so in opposition ruled states) will not make it practical to reduce either of the taxes.
End result - nothing is going to change unless the core system changes. Hopeless wishes these are.

[SmartCat]

By the way, fuel tax is classified as REGRESSIVE TAXATION and income tax is classified as PROGRESSIVE TAXATION. You can read more about it here:
https://www.investopedia.com/ask/ans...sive-taxes.asp

Low-income individuals pay a higher amount of taxes compared to high-income earners under a regressive tax system. That's because the government assesses tax as a percentage of the value of the asset that a taxpayer purchases or owns. This type of tax has no correlation with an individual's earnings or income level.

Taxes assessed under a progressive system are based on the taxable amount of an individual's income. They follow an accelerating schedule, so high-income earners pay more than low-income earners. Tax rate, along with tax liability, increases as an individual's wealth increases.

[Sran]

Fuel tax reduction will be my choice.

In ideal scenario taxes on FD, SB ac and other investments should be made tax free along with elimination of LTCG.

[GTO]

Mod Note: Poll added to spice things up .

[ValarMorghulis]

Reduce income tax.

3% shouldn't bear the burden of the rest. And for those saying that every one pays tax, the salaried folks pay those taxes as well, apart from the income tax.

PS: Our edible oil (we import 70%) consumption is equally causing us to lose forex just like crude.

Tax away the crude, the more you consume the more you pay.

[Raghu M]

You have GST which covers pretty much every item in the economy. Makes no sense to have income tax additionally. While, there needs to be a slight taxation over GST for salaried/earning class, it can't be atrociously progressive (current system). The govt. has alternate means to generate revenue. Cutting cess on fuel will make an instant relief but not much for salaried class. They are not travelling much, and the reduction in fuel will not lead to direct reduction in goods and services prices (global economy plays a huge role here). The supply chain system is badly hit and one economy like India will not see great advantage by reducing fuel prices. Yes, it will be affordable to the entire transport industry and the supply chain but I would prefer a big reduction in the income tax.

[Shreyans_Jain]

Income tax system needs to be drastically overhauled.

It is totally unfair to expect a small percentage of people, disproportionately salaried and middle class, to expect to bear the burden of the entire country. And then be subjected to double taxation, on income as well as on expenditure. One must also understand that there is a massive loophole in tax collection: agricultural income is fully expect. No mater if it is Rs 100 or Rs 100cr. What constitutes agricultural income is rather loosely defined and pretty bendable. It’s not for nothing that most of our netas show some agricultural income.

Fuel costs are a great equaliser. Taxes on fuel are a consumption tax. Their effect, however, is borne by everyone. Revenue generated by fuel taxes is disproportionately more than personal income tax collection. Abolition of IT can easily be compensated by a small cess on fuels, while the removal of an entire department will free up further resources for utilisation elsewhere.