Diwali is near and like many others, I went to a sweet shop to purchase some sweets in my town (population under 1 lakh). He readily denied to serve me as he told me there is no scope for more sweets manufacturing by him and he already made and sold out approx. 20000 kg sweets in these three days. Next manufacturing will start after two days from Diwali. Now the question arises, does he pay income tax ?? (approx. profit of these three days – 20000 * 50 = 10 lakh INR) and if yes then what amount out of his income ??
In India majority of the population is working in unorganized sector (almost 93%), still its contribution in country’s revenue is almost negligible. Last year out of 140 lakh income tax returns filed, 83 lakh returns were from salaried persons (govt. servant/professionals in companies). So are there only 40-50 lakh businessmen or workers in India eligible to file IT return (very less pay income tax out of them)? In a country with a population of more than 120 crore only 1-2 crore people pay income tax. Our tax to GDP ratio is also lower. Then how can we sustain our investment?
Country needs good brain to develop itself, But we are paying 14000/- per month for research fellows. On the contrary a Poha, Dosa, Idli seller is earning more than a govt. servant. Then what motivation will inspire a young talent to make his career in technical/scientific field. After all a vast country like India can’t run by selling Khakhra, papad, Bhujia.
Majority of the self-employed persons in India (tailor, photographer, shopkeeper, lawyer, etc.) are earning well than a IInd grade or IIIrd grade govt. servant in India. Still they are not in the purview of Income tax due to lack of assessment of their income and nature of their work.
This situation induces a govt. servant to take bribe to maintain his well-being at par with other peoples in society. After all when a recharge coupon seller is earning 40k a month, a medicine shop owner is earning 60k a month, then how come an SDM in Rajasthan will satisfy himself with 17100/- (in his probation). He will readily start making money by misusing his powers.
There are two major hurdles in collecting income tax from unorganized sector. First, the problem of assessment of their income. There is a high variability in their income as well as most of the income is in cash so hardly accountable. But the second problem is more serious which is - their vote bank. Like whatever income farmers from Punjab earn with support of govt. subsidy. They will never willing to pay a part of it as income tax. And No govt. will be able to harm itself by cracking its vote bank by imposing tax on them. Same case is with unorganized sector. If govt. crack down on lawyers, CA or whatever class, they will move towards other party and so no party want to dwindle its vote share.
So now the question is – Is it possible to maintain country’s growth with this meagre amount of tax payers? And second question – Is it possible ever to make the unorganized sector come into the purview of income tax ??