With regard to excise duties, the Survey said existing lacunae in the Cenvat needs to be removed, adding, "when completed, this process will result in a simple but equitable indirect tax system that will be easy for honest taxpayers to comply with." The Survey suggested that the direct tax reform strategy of reducing rates, broadening the tax base and modernising tax administration has been by and large successful. It said, "maintenance of the long-term faith of honest taxpayers requires that the personal and corporate income tax rates be kept at levels that eliminate the incentives for tax evasion."

It stressed that deeper and more systematic efforts are needed for weeding out economically unjustifiable exemptions and deductions. Also the auditing system and procedures must be such that high-income taxpayers who are more likely to evade taxes get picked rather than those who declare the real income and pay taxes. On the services tax front, the Survey suggested that bringing more services under the tax net can offset the likely loss of revenue through lower customs. The growing contribution of services to the GDP makes this sector conducive for mobilisation of greater resources, adding implementation of the recommendations of the Service Tax Committee would help in setting up an economically rational service tax that can be integrated at a subsequent stage with the Cenvat.

A comprehensive service tax combined with an efficient Cenvat can help in raising indirect tax revenues to the levels that prevailed earlier, the Survey said. This, it added, will also make it possible to continue with the customs duty rate cuts. It noted that basic custom duties are still among the highest in the world and there is broad agreement on the need for reducing them to at least to the Asian levels. This will also pressurise the industry and trade to increase efficiency and improve competitiveness of the economy. The Survey further said the upward trend in combined (Central and states) fiscal deficit to the GDP ratio in the recent years need to be reversed.

Describing the introduction of Fiscal Responsibility and Budget Management Bill in the Lok Sabha as a historic step in the fiscal history of the nation, the Survey said, "it shifts the emphasis of fiscal management from a purely fiscal management perspective to a longer time horizon for conduct of prudent and accountable fiscal policy". It said placing limits on the Central borrowings, debt and deficits and emphasising greater transparency in fiscal operations will also greatly facilitate effective conduct of monetary policy. The Survey said April-December last data show strong recovery in direct taxes. In the case of direct taxes, collections from personal income taxes and corporation tax at Rs 44,352 crore were higher by 30.5 per cent over the same period last year.

Collections from excise and customs duties at Rs 82,356 crore during April-December last posted a growth of 7.1 per cent against an increase of 19 per cent in April-December 99.