Pragmatic Budget under trying circumstances, says Pankaj Patel on union budget

FICCI-Gujarat State Council in association with Deloitte organised an Interactive Session on “Budget Analysis-2010” today in the city to gain insights on the impact of Budget on the Economy.

In his welcome address Mr Pankaj Patel, Chairman, FICCI-Gujarat State Council said, “It is a ‘Pragmatic Budget’ under trying circumstances, astutely managing fiscal deficit while keeping an eye on growth. By and large, The Finance Minister has provided a stable tax and policy framework for the Indian Economy to move forward.”

He also expressed his concerns towards the increase in indirect taxes and price hike on petrol, diesel etc. instead of which a move towards liberalisation and decentralisation of the price fixation mechanism as far as oil is concerned would have been more beneficial. Apart from that the budget was disappointing as far as other reforms like insurance, banking and company law bill etc are concerned.

“Reduction in state excise duty on products to 10 percent from 16 percent s a positive step but this is offset by the overall tax burden increasing on account of MAT rate being raised from 15 percent to 8 percent, when industry was demanding a cut down to 10 percent” he added.

In the session, experts from Deloitte Haskins & Sells expressed their views on nitty-gritty of the budget proposals. Mr. Mahesh Sarda, Patner, Deloitte Haskins & Sells said, “With prime focus of tax reforms, Hon’ble Finance Minister has demonstrated strong will of finally introducing new Direct Tax Code (DTC) and Goods and Service Tax Act (GST) from 1st April, 2011. The will was demonstrated from the actions as after many years a Finance Bill was presented with very few changes in the Income Tax Act.”

As a welcome change, in case of charitable trusts which were hit by last year’s amendment, a relief is provided by charging them to tax only if their commercial/business income exceeds Rs.10 lacs. In view of Mr. Sarda such limit of Rs. 10 lacs will hardly serve the purpose as it should have been atleast 50 to 60 lacs.

Mr. Sarda further expressed that reduction in personal tax rates is welcome but reduction in corporate tax is very marginal, and in fact, tax rate for MAT paying companies have gone up. The increase in weighted deduction for research is likely to fuel innovations. With 200% weighted deduction granted for the research expenditure, the government would effectively funding 66% of the research cost, he mentioned.

Small businessmen are expected to benefit significantly from increase of limit in tax audit from Rs. 40 Lacs to Rs. 60 Lacs along with corresponding increase in limit for presumptive taxation. To promote new limited liability partnerships (LLP), conversion of small private limited and unlisted public companies into LLP shall be outside the purview of capital gain taxation.

As far as changes made under indirect tax is concerned Mr. Rajesh Chitaliya, Senior Manager at Deloitte Haskins & Sells, has started with a pointer towards Government’s as well as Finance Ministry’s positive and realistic intent of implementation of Goods and Service Tax Act by April 1, 2011. On Excise Duty front Mr. Chitaliya stated that f

or the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy, it has been proposed to introduce levy of Clean Energy Cess on coal, lignite and peat produced in India. In furtherance, Excise duty on petrol and diesel has been increased by Rs.1 per litre for branded as well as unbranded. Further, excise duty on cement and clinkers has also been proposed to be increased. Further, excise duty on “large car”, MUV, SUV, etc. has been increased from 20% to 22%. On the front to reduce long-drawn litigation it has been proposed not to levy of penalty in cases where excise duty or service tax along with interest has been paid before issuance of notice by department.

Regarding Service Tax he said that in addition to expanding scope of existing services, eight new categories of services like that of health services provided by hospitals, multi-specialty clinics, services of promotion or brand services, services of permitting commercial use or exploitation of an event, specific services performed by builder, etc. have been introduced. Provisions of export of services have been relaxed to great extent by removing conditions of provision of services from India and use of services outside India.

Through retrospective amendment non-profit organisations have been proposed to be covered under the category of commercial training and coaching centre. Through another retrospective amendment, it has been proposed to negate judicial view renting activity has been proposed to be included in definition of taxable services.

It has also been proposed to grant several exemptions / concessions which includes highly awaited exemption of service tax exemption to packaged IT software in pre-packed condition subject to certain conditions, services of transmission of electricity, services of transportation of food grains and pulses through road, services provided by central and state seed testing labs and concession of non levy of services tax on statutory taxes on air tickets.

On Custom Duty aspect Mr. Chitaliya reiterated that the pick rate of custom duty has been remained unchanged. He also mentioned that through retrospective amendment with effect from June 26, 2009, it has been now provided to levy of 16% of ad valorem + Nil Special CVD on Electrical energy supplied from a Special Economic Zone to the Domestic Tariff Area and non – processing areas of SEZ.

In addition to above, additional duty of customs on goods in pre-packed form including mobile phone, watches, ready-made garment and intended for retail sale has been waived. Concern of industry over insufficiency of value of duty free sample imports has been addressed by increasing limit of duty free imports of samples from Rs. 1 lac to 3 lacs per annum.

At the event, Mr. Savan Godiawala, Director, Deloitte expressed his views on economy front and said, “The Union Budget this year has aimed to focus on inclusive growth and insuring food security. These concerns for aam aadami have gone hand in hand with credible measures for improving investment climate, strengthening infrastructure and fiscal consolidation. As the country looks to ‘quickly revert to high GDP growth path’ in the wake of ‘uncertain times’, concerns for inclusive growth targeting the disadvantaged sections form the defining features of the Budget.”

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