The indirect tax proposals announced as part of the Union Budget consist of a diverse bag of changes and several new cesses. The most significant of these changes include changes in Customs and Excise duties on sectors such as IT hardware, capital goods, chemicals etc with an intention to reduce costs and promote competitiveness of domestic industry.
Here we are going to discuss The Good, The Bad and The Ugly of Budget 2016:
THE GOOD:
- Massive increase in public spending on infrastructure; an increase of 22.5% over the previous year.
- Curtailing power of the Income Tax department through various small changes.
- Revenue gain of Rs 19,610 crore through gain from indirect tax changes irrespective of cuts in direct taxes.
- 100% deduction for profits of undertakings from housing projects in cities during Jun ‘16 – March’19
- Service tax exempted for housing construction of houses less than 60 sq. m to stimulate affordable housing
- Debt recovery tribunals to be strengthened. This is the need of the hour for bad loan-laden banks.
- Rationalised welfare schemes to avoid overlapping between Centre and State governments. This could help save money.
- The proposed amendment to Section 24 (b) – increasing the time limit for construction of a house from three to five years to avail the deduction of Rs 5 lakh – was also overdue considering the fact that many housing projects remain only projects for a long time. Increasing the deduction under Section 80EE for first time housing loans to Rs 150,000 will benefit only a few but continues on the theme of housing for all.
- No interference while coordinating with government bodies.
- Aadhar to be used for subsidies – target beneficiaries accurately.
- DBT for fertilisers on pilot basis. This will help plug leakages and save more money for the government.
Increase in allocation for road projects. - 50,000 km of state highways to be taken up for upgradation as national highways.
- Capex on roads and rail = Rs 2.18 lakh crore in FY17.
Increase in Plan expenditure for fiscal year ending March 2016 compared to earlier Budget estimates. - Fast tracking of irrigation projects.
- Around 5,500 villages electrified as Feb 23rd – more than total. achievement in previous 3 years. All villages to be covered by 1st May.
- 85% of road projects back on track.
- Highest production of motor vehicles ever in India in 2015.
- 7.6% growth despite export growth contraction.
- CPI inflation fell to 5% levels.
- CAD 1.4% of GDP in FY16.
- High forex levels at $350 billion.
- The focus on rural employment and infrastructure.
THE BAD:
- The upper middle class and the “rich” were given short shrift: Not only was there no relaxation on tax slabs or exemption limits, they were hit with an increase in surcharge, from 12% to 15%, on tax on incomes above Rs 1 crore.
- Dividend earnings of over Rs 10 lakh per annum will now have to attract tax.
- Here is a new cess – in the name of ‘krishi kalyan’ (farm welfare) – on all services and an infrastructure cess on cars of all sizes.
- The reduction in the corporate tax rate for a very limited class from 30 to 29 per cent was laughable.
THE UGLY:
- The Government could not show the courage to repeal the retrospective tax on capital gains.
- The government has decided to impose tax at the time of withdrawal on 60% of the contributions made after April 1, 2016, to EPF and other schemes.
- A 0.5% increase in earlier 14.50% service tax is like another nail in the coffin. It will surely increase the cost of everything.
