The government has forgone revenue of Rs 17,15,461 crore due to tax incentives (direct and indirect taxes) in the last three financial years. The direct and indirect taxes forgone in last three years were Rs 3,40,279 crore and Rs 13,75,182 crore respectively.
Minister of State for Finance Santosh Kumar Gangwar replying to a query in Rajya Sabha stated that, the direct taxes forgone is estimated at Rs 1,28,639 crore in 2015-16, Rs 1,18,593 crore in 2014-15 and Rs 93,047 crore in 2013-14. Besides, the indirect taxes forgone is estimated at, Rs 4,82,489 crore in 2015-16, Rs 4,35,756 crore in 2014-15; and Rs 4,56,937 crore in 2013-14. Minister also said that, Rs 13,03,344.61 crore was allocated for food subsidy in 2016-17 (Budget Estimate) and so far Rs 57,333 crore has been released.
The revenue forgone is also referred to as tax expenditure or indirect subsidy to taxpayers. The tax policy provides specific tax incentives which give rise to tax preferences. The amount of revenue raised is primarily dependent upon the collective tax base and the effective tax rates. The determinants of these two factors are a range of measures which include special tax rates, exemptions, deductions, rebates, deferrals and credits. These measures are collectively called as ‘tax incentives’ or ‘tax preferences’, having an impact on Government revenues.