Amid widening fiscal deficit, Prime Minister’s economic advisory panel suggested aligning diesel prices to global market in a phased manner and also raising excise and service taxes to pre-crisis level of 12 per cent.
Chairman of Prime Minister’s Economic Advisory Council (PMEAC) C. Rangarajan also pitched for deregulation of urea prices, while releasing the Review of the Economy: 2011-12.
The government expects that its subsidy bill would increase by Rs 1 lakh crore to Rs 2.34 lakh crore, mainly on account of higher outlay towards fertiliser, food and oil.
On improving the tax to GDP ratio, Mr. Rangarajan said the excise duty and service tax should be increased to pre-crisis level, a move which will bring in additional Rs 35,000 crore.
Before the economic crisis, service tax and excise duty rates were at 12 per cent, but as a stimulus the government had brought them down to 10 per cent in 2008-09.
