The Chamber feels that the Union Budget presented by the FM today is on the expected lines.

While the Chamber appreciates the focus and moves towards fiscal consolidation and rationalization of subsidies, the greatest fear is that the increase in service tax,  along with broadening the tax net  and targeting a multifold increase in indirect tax gains,  is likely to fuel greater inflation.

Welcome points:

The Chamber welcomes the relaxation in rules and the reduction of withholding tax on External Commercial Borrowing to 5% for the sectors such as power, airlines, ports, etc. Permitting ECB to airlines, sectors like affordable housing are welcome.

The elimination of cascading effect of dividend distribution tax on multi layer corporate holding structure is welcome.

The weighted deduction for R&D, incentivizing Skill development initiatives with additional funds allocation are welcome moves.

Fillip to MSME sector and provide better access to funds is laudable.

Launching a National Mission on Food Processing is to be appreciated.

The deepening of bond market particularly for corporate bonds by permitting QIB investment is a welcome move.

The moves to encourage small investors in the equity market through the Rajiv Gandhi scheme is welcomed. This will encourage retail investors.

Enhanced thrust to infrastructure development  and extending the viability gap funding to increased categories like irrigation etc  are welcome.

The simplified refund mechanism for exports would greatly help exporters.

Introduction of advance pricing mechanism is a welcome move which will reduce transfer pricing disputes.

Points of Concern

The MAT for all forms of business seems to be a negative move. This could affect partnership firms also.

TDS on capital gains for immovable property transactions would push up compliance costs.

The tax on share premium received by companies in excess of market value of shares is worrisome.  This is an item which cannot be considered as income for   the investee companies.

On personal taxation, there were hopes that the limit will be increased from the present Rs.1.80 lakhs to Rs.3 lakhs.  However it is disappointing to note that it has been fixed at Rs. 2 lakhs.

Anti avoidance provision in direct tax should be implemented in a manner which is fair and transparent with suitable safeguards.

On indirect taxes, the estimated service tax increase of Rs 18,600 crores seems to have a enormous potential to fuel inflation. The FM could have waited for GST to widen the services net.

The across the board increase in excise duty to a peak of 12% will also fuel inflation. There seems to be a huge gain in indirect tax collections of Rs.45,940 crores.

Taxing budget at a time when industry and public are suffering recession and inflation does not augur well for the economy.

On service tax and excise duty, as they are sought to be harmonized, the Chamber hopes that the benefit of set off will be seamless.

It is also disappointing to note that DTC, GST and other such reforms are again deferred.

16th March 2012
April 2024
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