The Budget 2017 was unique in several respects. It was for the first time the presentation of budget was advanced to the first of February so that a road map is placed to pass the bill well in time to march well ahead of the commencement of the next financial year with all its attended benefits. The other distinctive feature of the Budget 2017 was that a separate rail budget for Railways was dispensed with by integrating with the main budget so that Railways not only fall in line with other ministries but also could well focus on its main task of improving and upgrading the railways. The next one is that it was presented immediately after the Demonetization that was unleashed on 8th October 2016 amidst acrimonious reactions mainly from the political class but without any visible clue.
The 'ensuing' budget shall be 'ensuring' budget in the light of fast approaching Parliament Election in 2019 in the sense that the government will have to perforce extend captivating doles under the guise of welfare measures to ensure votes that is understandable. Apart from this, the government shall have to take some call spot on certain issues to correct the call of time. In the recent election for Gujarat assembly, the distress of rural population is naked in non-urban constituencies that the ensuing budget may have to address sooner than later. There is a feeling of unease among younger population that may have to be addressed by initiating steps to generate employment.
Tax Vis Duty:
'Tax' is normally taxing-burdensome, while on the other hand 'duty' is an obligation, task and responsibility. There are so many taxes like purchase tax, sales tax, presently, value added tax, wealth tax, service tax etc. Besides, it also covers customs duty - import duty and export duty; besides excise duty. One more duty named estate duty that is taken away from the statue book a long time before on the ground that it was neither viable nor economical to administer.
Though both taxes and duties for a bare look are various sources for revenue, they is a- delicate difference - unlike in the case of taxes where they are collected at the time of transfer of property, in the case of custom duty-import and export duties, they are primarily 'imposed' rather 'levied' to regulate and take care of the local industries and their interests - to promote exports and encourage local productions by properly leveraging the said duties rather than only taxing mechanism. In other words, the said levies are the duties cast on the government to take care of domestic industries interest from competition from across. In the case of excise duty, it was levied on the manufacture, though money spinning was an attended effect but now submerged in GST a big ticket tax reform launched in June 2017 whose impact will be known/gauged at the time of presentation of the 2018 Union budget
Direct Tax a different approach- industry:
Coming to the tax regime, it should have 'target' to 'accelerate' economic growth for public good and should have 'X' factors to generate enthusiasm among the people at large to move forward.
Coming to the Direct tax, there should be a different approach-between individuals and business income. Industrial growth is the need of the hour. Any industrial development increases production level, employment benefits, exports, infrastructural and social developments multiply and as a consequent revenue collections increase. Therefore, there is a case to have lower level of taxation if the country has to compete with other nations more so in the various manufacturing sectors.
The Budget 2017 has moved in the correct direction but only in limited way- companies having a turnover less than RS.50 Crores but exceeding RS.10 Crores effective tax rate was relaxed to 28.84% as against existing 34.6%. This may ease liquidity to the extent for small and medium entities. It may also marginally increase employment potential but, what about exports? It is understandable, owing to constraint; it is not extended to all industries but there is a definite case, in fact, an pressing need to cut the rate across companies so that our country can compete particularly in export front with China with eased cost, besides providing employment avenues. The U.S House has approved recently a far-reaching Tax Bill that among other things proposes to lower the tax rate for corporate from 35% to 21%, probably the biggest tax reform that may the road model for us. Any act in this direction has the potency to expand industrial activity with further employment potential.
A relook at ICDS:
Provisions of MAT are rationalized in line with Ind. AS regime. Further, the extension of carry forward facilities to 15 years from 10 years for utilization of MAT credits was certainly a welcome move. But, what is about the mischievous ICDSs? Recent Delhi High court judgment on ICDS is unequivocal in declaring that 'The ICDS is not meant to overrule the provisions of the Act, the Rules thereunder and the judicial precedents applicable thereto as they stand' The court has taken a stand to the effect that the various ICDSs are unsustainable in law and ultra vires. For brevity not dealt with here and therefore the judgment may be visited upon. The government should address the issues in the ensuing budget to nib them in the bud so that industry is not loitering for clarity.
In the previous budget, the directors' fees are scoped out of Domestic transfer pricing that will facilitate ease of doing business by putting full stop for avoidable ligations.
Provisions to ease the tax holiday regime may help start-ups.
Section 44ADA on Presumptive Income Professional:
This section is framed in line with the recommendation of Justice Easwar Committee for simplification of taxation of professionals to bring parity between small businessmen (who enjoy presumptive taxation u/s 44AD) and small professionals, to reduce compliance burden of small professionals and to facilitate ease of doing profession. Resident assesse who isIndividual (or Hindu undivided family (or) Partnership firm (other than limited liability partnership) are eligible assesses. Professionals referred to in Section 44AA (I) whose total gross income does not exceed Rs. 50 lakhs in a financial year are eligible beneficiaries.
The intention of the section is 'noble and principled one' but has the potency of misuse. How?
If a person is eligible under the section as spelt out earlier, he isotherwise entitled to the provisions of sections from 30 to 38 (including depreciation and un-absorbed depreciation / allowances) All deductions from sections 30 to 38 (including depreciation and un-absorbed depreciation / allowances) shall be deemed as allowed. In today's business scenario, a large number of organisations appoint on full time basis as professional employees mostly retired people. In real terms, they are full time employees, working under the direction of the employers without retirement benefits. They cannotprovide professional services other than the employers. These professional do not maintain offices, workers etc., to claim the benefits enshrined in the above said sections since tied up to only one employer without anyway practicing in the profession it is apprehended that this section is misused to claim presumptive income.
It is better this lacuna is addressed to pluck the hole so that the benefit is availed of onlyby the intended ones.
Direct Tax a different approach- Individuals:
Capacity to pay is the dictum in the tax regime for individuals. One cannot equate a person with an income of RS 10 lakhs with individuals earning in Crores. 2017 budget brought in a lowest rate of 5%for income up to RS.5 lakhs. The initial exemption level has been increased from RS. 2.5 lakhs to Rs.3 conferring a tax benefit of Rs. 12500.-a welcome step.
Again, a surcharge has been levied at 10% on income beyond Rs.50 lakhs to one crores and thereafter surcharge of 15% continues. To that extent, it is a welcome step Why not thereafter? A fear complex has set in for the government where ethics demand an accelerated surcharge especially when income level at the higher end - sky rocketing. This fear psychosis should end and people getting beyond Rs. 5 Crores and more should be on a different footing. If the government cannot increase surcharge in view of ensuing election, it should go with a scheme that for individuals coming under over a specific income can be encouraged to donate minimum on specific scale for certain welfare schemes recognised by the government for the value of surcharge beyond 15%, it will cut the ice properly. This will be targeted to relieve the stress and distress of less privileged
A relook on Dividend Tax:
Mr. Chidambaram in his earlier tenure as finance minister has made dividend in the hands of the receiver as tax free making mockery of level playing traits of direct taxation but, has substituted with a dividend tax under the guise of double taxation. Why the company is to bear for the shareholders? That money may help in paying more dividend or ploughed back to facilitate liquidity. What is the consequent? These rich shareholders, primarily promoters holing a lion's share of shares are the undue beneficiaries. In the previous budget, it was addressed in a limited way-receivers of dividend beyond Rs. 10 lakhs are also taxed at 10%. In 2017 budget, promoters holding through private trust are also brought under the net, if the dividend crosses Rs. 10 lakhs- a welcome move for level playing but we have to wait to see how they circumvent. What's the way out? Revert back to the old regime. Remove the dividend tax in the hands of the company. Why company has to bear the dividend Tax? Give tax exemption for dividend in the hands of the receiver for a specified amount- say, a lakh or around and beyond that will be taxed at the applicable rate to the individuals. With Aadhar card and PAN card link, it would not be difficult to trace in today's internet world. Though it may be difficult to go for this approach in the context of ensuing election, the suggestion may be revisited for level playing.
Case for revival of defunct Estate Duty:
But, estate duty is on a different trailer. The duties mentioned above cannot well fit in with defunct estate duty since the latter relates to' personal domain'. Even though it is defunct, there is still an avid case for revival. A personal tax regime is more dictated by capacity to pay -a command of one of the primary cannons of taxation. It should not have been done away from the statue book only on administrative convenience. It is the value of estate bequeathed on the death of a person and therefore, ethics demand that it is the ordained 'duty' of the successors to share something to the public since devolved on them without their much of labour and therefore, estate duty may be construed as parting 'Dhan' in respect of departed soul and hence there is a case for revival of estate duty in the statue book. It is the dictate of justice delivery than a mechanism of revenue. If necessary, the exempt limit can be suitably fixed.
Again, on ethical dictate, there is a case for revival of Wealth Tax notwithstanding revenue at least beyond say Rs. 50 crores.
Relief in input on fertilizers/ agricultural instrument/low rate of interest:
How to address the rural population embroiled in stress and distress? Waiving agricultural loan could not be a panache and panacea. That may have the potency to generate defaults so as to seed political spawn. The input tax on agricultural feedings like fertilizers and instruments used in cultivation like tractors may be reduced considerably to relieve burden on agriculturists. The interest on agricultural loans may be considerably reduced. It is known fact that agricultural productsare purchased at rock bottom price but sold at more than doubled the rates, middle men eating the cake in block. The budget should address this problem by instituting proper mechanism to ward of the rural mistrust and consequent unrest
The government is in the process to roll out a pan India 'faceless and nameless' e-assignment procedure from 2018 for tax payers. Let us hope it will ease the position.
For senior citizens, Government should address this keeping in view the present day scenario mostly issuing out of health related issues.