No change in income, corporate tax rates
NEW DELHI: In a measured budgetary exercise, Finance Minister P. Chidambaram on Tuesday sought to provide the necessary push to agriculture and various sectors of industry to spur the growth momentum and build infrastructure. At the same time, he took care to fulfil the United Progressive Alliance Government’s commitments under its National Common Minimum Programme.
Mr. Chidambaram ensured that adequate revenue was generated during the coming fiscal to fund the various social objectives even as he chose not to further burden either the "aam aadmi" or India Inc. To make life easier for the salaried class, he proposed to include fixed deposits in scheduled commercial banks for five years for calculating the Rs. 1 lakh exemption for income tax. He also abolished the one-by-six criteria for filing IT returns.
Presenting the budget for 2006-07 in the Lok Sabha, Mr. Chidambaram did not propose any change in the corporate and personal IT rates; neither did he impose any fresh tax. Instead, he widened the service tax net to include 15 more services such as credit cards, luxury class air travel and ATM operations to mop up Rs. 34,500 crore during the new fiscal.
Bringing cheer to the corporate sector was the substantial dilution of the Fringe Benefit Tax, under which an amount up to Rs. 2 lakh would get exemption when deposited in an approved superannuation fund. Besides, the rate of tax on certain perks has been reduced to five per cent from 20. Mr. Chidambaram, however, chose to continue with the cash withdrawal tax to enable tax authorities to expand their database for subsequent computerisation.
Countervailing duty
On the indirect tax front, the peak customs duty has been reduced to 12.5 from 15 per cent to bring it down to the ASEAN levels gradually. But, a four per cent countervailing duty has been imposed on all imports, barring a few exceptions.
As for excise, automobile manufacturers have already announced massive reductions in the prices of their "small car" models following the announcement of a cut in duty from 24 to 16 per cent. The move is in keeping with the Government’s objective of making the country a manufacturing hub for the auto industry. However, in deference to the sentiments of the Left, luxury cars have been left out.
Aerated drinks will also cost less on account of the cut in duty by the same margin. Smokers will have to pay more following an increase of five per cent in excise, while condensed milk, ice-cream, meat, fish and poultry preparations as also pasta and other ready-to-eat products will be cheaper, thanks to complete exemption.
To ensure that farm growth achieves a growth rate of about four per cent in the coming years, Mr. Chidambaram announced a comprehensive package for farmers, including cheaper credit.
Taking note of the buoyancy in the stock markets, he raised the Securities Transaction Tax across-the-board by 25 per cent.
The net effect of the changes will be an additional revenue of Rs. 4,000 crore through direct taxes, while that from indirect taxes is expected to fetch an additional Rs. 2,000 crore.
The allocation for the eight flagship UPA programmes, including the employment guarantee scheme, has been increased to Rs. 50,000 crore and for defence spending to Rs. 89,000 crore. The budget estimates the total Plan expenditure at Rs. 1,72,728 crore and non-Plan expenditure at Rs. 3,91,263 crore.
With the total expenditure pegged at Rs. 5,63,991 crore - revenue collections estimated at Rs. 4,03,465 crore and expenditure at Rs. 4,88,192 crore - the revenue deficit is estimated at Rs. 84,727 crore. This works out to 2.1 per cent of the gross domestic product (GDP). Likewise, the fiscal deficit is estimated at Rs. 1,48,686 crore, 3.8 per cent of the GDP. In effect, Mr. Chidambaram has managed to return and adhere to the FRBM target of reducing revenue and fiscal deficits by 0.5 and 0.3 per cent of the GDP annually.
For the future, he proposed a road map to introduce a Goods and Services Tax to replace the present excise and service tax from April 1, 2010.
RSS 2.0