Denying LPG subsidy to the well-off hits a roadblock

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New Delhi: Implementing the plan to deny cooking gas subsidy to people with an annual income of more than Rs.10 lakh has hit a speed breaker with the income-tax department refusing to share confidential information relating to taxpayers with fuel retailers.

The Income-Tax Act prohibits disclosure of individual taxpayer information and makes it a statutory obligation for officers to maintain secrecy.

The oil ministry is now working on identifying the financially well off among the 163.5 million LPG customers, out of which 147.8 million get subsidy directly in their bank accounts. For this, it will seek inputs from dealers who supply LPG cylinders to households, who are the only direct point of contact with customers.

For new LPG customers, it will be made compulsory to make a self declaration of their annual income at the time of applying for a cooking gas connection, in the same manner that one certifies in the tax return that the information submitted is true to the best of one’s knowledge, said a highly placed official in the oil ministry, who did not want to be named. If the information is found incorrect later, this declaration will form the basis for action by oil companies.

Going by some estimates, the government could save about Rs.300-500 crore a year by limiting LPG subsidy only to those earning less than Rs.10 lakh a year. In this year’s budget, the finance ministry allocated Rs.30,000 crore for oil subsidy, out of which Rs.21,140 crore was earmarked for LPG subsidy.

As per data available with the income-tax department, only 1.9 million assessees (mainly individuals) have an annual income of Rs.10 lakh, which is a small fraction of the people who get cooking gas subsidy.

The actual number of people with income above this level may be much more than what is reported. These individuals are likely to get captured in the tax base in the coming years considering the massive campaign the tax authorities are running for the last few years to identify individuals who either do not file tax returns or have stopped filing returns. This has led to an increase in the number of return filers from 35 million in 2012 to 47 million in 2015. Every year, the department identifies more than 2 million individuals who make high-value investments or credit card transactions, but do not file income-tax returns. At present, only less than 4% of the 1.2 billion people file tax returns. People who depend on agriculture for a living as well as traders and self-employed people who may either be earning tax-exempted income or may not be reporting their income in full are not covered under the tax base.

So far, about 7 million consumers have voluntarily given up LPG subsidy under the ‘Giveitup’ campaign, which enables the government to give subsidized LPG to more rural households.