In the budget the Hon’ble Finance Minister emphasizes inclusive growth in the challenging global scenario. The budget took into consideration the falling growth rate and its impact on social sectors. The budget provides greater outlay for rural development, rural health and other social sector schemes.
-The Minister emphasized Infrastructure sectors and stated that public private partnership is necessary for infrastructure development. It appears that Government is looking for growth in Infrastructure as driver of overall growth in the economy. It is seen that expenditure in Infrastructure sector has large trickle down effect in economy and such investment led growth have future multiplier effect. The minister proposed greater outlays for IIFCL, highway, power, urban renewal mission, accelerated irrigation development, national gas grid, rural road and electrification, low cost housing, water resource management, etc. Outlay of Assam Gas Project has been increased.
Education is an important sector and Finance Minster has provided greater outlays for education sector. I feel that education sector must be given infrastructure status as development of human resource is the most important infrastructure development in modern knowledge driven economy.
- The minister emphasized tax reform with modest rate and almost nil exemption to simplify the tax structure. The Minister said that the government will endeavour to achieve these objects in the next four years. Goods & Service Tax is likely to be introduced from next year.
The Minister also emphasized accountable and transparent public institutions.
-The Minister praised the nationalization of banking and insurance sector and said that banking and insurance shall continue to be in public sector. Further, the minister said that there will be greater participation of public in PSU disinvestment. This negates strategic sale of PSU units and not appears big bang PSU disinvestment plan. Regarding the banking sector, recapitalization for PSU banks has been made. Disinvestment is possible in RITES, Cochin Shipyard and TCIL.
There is no change in the Corporate Taxes. Fringe Benefit Taxes are abolished. Investment linked tax incentives are being introduced. Minimum Alternate Tax increased to 15%. Alternate Dispute Resolution scheme is to be made for resolution of transfer pricing dispute.
Commodity transaction tax abolished.
Personal Income Tax exemption limit has been increased by Rs. 10000/- (Rs. 15000/- for senior citizens). On personal tax, surcharge has been removed. Limit of 80DD increased to one lakh.
Sunset clause of Software Technology Park extended by one year. Tax Holiday of exporters extended by one year.
Overall structure of Custom, Central Excise & Service Tax maintained.
Overall rate of Custom duty remains the same. 5% Basic Custom duty imposed on set top boxes. On LCD panel the rate of LCD reduced from 10% to 5%. Custom duty on import of gold and silver has been increased. Custom duty on wind power equipment reduced to 2.5%, cuts custom duty on bio fuels and live saving drugs.
Central Excise Duty:
Overall structure has been maintained. The Minister has proposed unification of rate to the mean rate of 8% and therefore various products which were attracting 4% Central Excise duty will now attract 8% duty. However, food, drugs, pharama, paper, utensils, pumps and cheap electric bulbs will keep on attracting 4% duty.
Streamlining of duty structure in software sector. Some duty has been reduced on vehicles and petrol driven trucks (8%) and duty on the cars has been unified. Branded jewellary has been exempted from Central Excise Duty.
Service Tax has been imposed on transportation of goods through railway and post. Some procedural changes in refund of service tax paid to exporters have been made through self certification/certification by CA.
Service Tax has been levied on legal services, however individuals providing the services remains exempt.
Details in legal changes in Indirect Taxes area to follow.
Overall a laclustre budget. The Fiscal deficit number of 6.8% of GDP is alarming. Nothing concrete on reforms, FDI, disinvestment.
Rajesh Kumar & Associates