Directions: In this section, you have a few short passages. After each passage, you will find some items based on the passage. First, read a passage and answer the items based on it. You are required to select your answers based on the contents of the passage and the opinion of the author only.

The taxation policy of the Indian government has been problematic on two grounds. Not only has it been pro-rich(and anti-poor), but it has deprived the state of important fiscal resources both particularly damaging in the context of the COVID crisis. After abolishing the wealth tax in 2016, which was replaced by a 2 percent surcharge on super-rich individuals (taxable income of over Rs 10 crore), the Narendra Modi government rolled back the increase in surcharge in 2019. More importantly, corporate taxes were slashed from 30 percent to 22 percent to attract foreign investors and induce Indian companies to invest. In parallel, the reliance on indirect taxes has risen a trend that started in the middle of the UPA years. As the Modi government has increasingly relied on hiking cesses and surcharges, the share of indirect taxes has increased by up to 50 percent of the gross tax revenue in FY 2019, as opposed to 43 percent in FY2011. The combined share of customs and excise duties and value-added tax reached an all-time high of 10.5 percent of GDP, with the previous high of 10.1 percent in 1987-88. This high was following a three-year-long steady increase in customs or excise duty on commonly used goods,

such as petroleum products, metals and sugar, automobiles, and consumer durables. This is also when the service tax was hiked steadily to 18 percent (under GST) from 12.4 percent in 2014. This is troubling because indirect taxes often penalize the poor and the middle class more

than the rich. Another example is the imposition of fresh cesses such as the Swachh Bharat cess and Krishi Kalyan cess in addition to GST. The permanent nature of these cesses has been widely opposed by the states and criticised by the CAG, who has pointed out the lack of transparency and incomplete reporting in accounts on the utilisation of amounts collected under cesses. While indirect taxation is anti-poor, cuts in corporate tax that have resulted in a revenue loss of Rs 1.5 lakh crore have contributed to making the state poor. The timing of these tax cuts was puzzling as direct tax collections have shrunk by over 3.5 percent with a meagre increase in indirect taxes for the period April-February of 2019-20. As indirect taxes have not made up for the loss in direct taxes, the fiscal deficit jumped beyond 4.5 percent of GDP in 2019-20. This is one of the reasons why public spending on education and health has stagnated. Cuts in corporate taxes, increased indirect tax revenues, decreased capital expenditure and practically no change in revenue expenditure on health and education show that India’s taxation policy is more business-friendly than pro-poor, at a time when a supply-side oriented approach to the economy is counter-cyclical.