However, general apprehensions are there. The revenue collection through income tax and service tax is to the tune of 4 lakh Crores! How this revenue can be compensated is a matter of debate. If it’s made to be compensated imposing indirect taxes, then it would be like giving sops to economically capable people and taxing poor. It can be an indirect subsidy to the people who are better placed in earnings. Personally I am always against any type of subsidy as it mean ‘Rob Peter & help Paul’!
Some estimate says that implementing bank transaction fees would compensate around 40000 Crore Rupees. Question remains how the deficit can be managed. Anyway a clear view can be taken after seeing full detail of such a move. Across the world, there are many countries that do not have an income tax policy and thus the idea is not totally unfeasible.
However larger question is, does it really help the middle class particularly salaried class? The employer may reduce salaries citing that there is no income tax and hence take away salary remains the same. Thus salaried class wouldn’t be benefited whereas businessmen would be largely benefited. Also because of no income tax provision, there would be no tax audit. Some vested interest groups may take this opportunity to show their incomes inflated to prove their higher solvency to be eligible for greater loans. How the black money would can be contained in the absence of a tax audit. Of course, new ideas always welcome. Let’s see full detail of proposed abolishing of income tax & service tax.