Budget 2010: Some direct and a few indirect expectations!

FEBRUARY 0! 2010
B" Ste#en $% Sou&a! Former 'RS ( )anagement *onsu+tant
$ear Finance )inister!
Sir, I place before you some expectations and the wish-list for the forthcoming
budget. It represents the hopes and aspirations of all the stakeholders from the
common man, the salaried worker, exporters, entrepreneurs, and industrial
sector. I was pleasantly surprised when representations made by me for some
trade associations, made before the last July budget were positively considered,
and this has inspired me to do a thorough research and come out directly, with
some meaningful suggestions.
A , RES-UR*E )-B'.'SA/'-0 1RE$U*/'-0 '0 F'S*A. $EF'*'/
++ he biggest task before the !inance "inister is to balance #ovt. $xpenditure
of roughly , %s. &.'( lakh crores stimulus ) tax foregone ,with the %*I governor
+. Subbarao advice to reduce the fiscal deficit , avoid a -.hakravyuh/ like
situation in these kalyug times. !ertili0er subsidy overshoots, and postponement
of 1 # spectrum auctions have thrown all earlier pro2ections out of gear, with
deficit going beyond pro2ected 3.34 to expected (.'4. 5 gradual increase in
cenvat and Service ax rates is inevitable. he !" in +ecember 6778 had
promised 9arliament disinvestment through big ticket 9S: share sales in 67&7,
of profit making ;avratnas, as well as those 9S:s re<uired to meet mandatory
listing norms of &74 public ownership. hese norms need to be enhanced to
&34 public ownership, as the best way to meet public expenditure for public
welfare through disinvestment of public sector units, in these times of global
depression. 5t prevailing market rates, this dual step of sale of shares&34 public
ownership ) 34 stake offering in big ticket 9S:s, should bring in %s 13,777 to %s
37,777 crores ,next fiscal.
++ $xpediting the 1# spectrum auction process in next fiscal year 67&7-&&
should a t least bring in roughly another %s.13,777 crs to %s.=7,777 crs,
++ hese two big ticket measures, coupled with a gradual hike in diesel, petrol
and gas prices before the budget, and expectation of reduction in fertili0er
subsidies due to increasing availability of ># *asin gas input at administered
controlled prices are the most practical measures to bring down the fiscal deficit
to manageable levels with out sacrificing on growth expenditure
++ ?ike in central excise and service tax duties looks inevitable, given huge
fiscal deficit expected around (.'4, and the %*I #overnor -chakravyuh/ warning
of inflationary govt. expenditure. I suggest a dual graded withdrawal of stimulus
package- increase .envat rate by 14 for sectors that have done well, and hike
of only &4 for still recovering sectors. his cross subsidi0ation and gradual and
graded removal of fiscal stimulus package is much better option than across the
board enhancement of rates.
++ ;oble laureate and renowned economist 5martya Sen ,has suggested that
unless basic health and primary education standards are lifted, from present
abysmal state, the country cannot progress to its expected role of a global
economic super power. 5ccordingly I suggest that existing education cess be
maintained, but rate reduced from 14 to 64 to be used exclusively for primary
education programs. 5n 5dditional *asic ?ealth cess of 64 to be introduced, to
be used exclusively for basic health programs slated under ;ational ?ealth
"ission. he high income bracket beyond %s &7 lakh annual taxable income,
should not mind this small token contribution to basic need of the poor, given
that we rarely have charitable industrialists like *ill #ates @A&7 *illion announced
recently for global vaccination programs B and Carren *uffet among our
business magnates today.
++ Service sector in India has registered the highest growth in January 67&7 ,
ever since September 677', when the global recession began he stimulus
package for services sector having brought about a noticeable recovery in
growth rates. #iven huge fiscal deficit, the rate may be restored to its original
&64., barring few sectors like export of services, which need total exemption.
++ he Cealth ax rates on the Cealth of our umpteen neo-rich billionaires and
millionaires need to be enhanced, 9resently, they are ridiculously low. #ermany ,
:S and other developed ;ations have higher and more realistic rates. It is only
fair that the super rich and the wealthy should contribute a part of their wealth
earned from society, back to society .Chy should only the salaried working class
bear an ine<uitable, disproportionate and unfair tax burden if calculated on
earning capacity basisD
++ !inancial wi0-kids have uncanny ability to enrich themselves at cost of
investors .9resident Ebama has put curbs on this practice of -bonus/ payouts.
*ritain charges 374 tax on these -bonuses/. o discourage this out right daylight
loot, and to keep this virus from the capitalist west away from our system, a
similar 374 one time income tax payout levy, deductible at source, be levied on
all - fat bonus/ payouts in financial sector.
B, '0*E0/'2ES A0$ $E2E.-3)E0/ S*4E)ES
++ he 64 interest subsidy on bank credit to certain employment intensive
exports sectors, valid till "arch 1&, 67&7 be further extended up to "arch 1&,
67&6
++ 9resident Ebama focus is on tax incentives for companies creating 2obs he
time limit for notification of industrial parks under ;ew Industrial 9ark Scheme
be extended up to "arch 67&= @Section '7-I5 and '7 I* tax holiday benefitsB
from present deadline of "arch 67&7 to boost to infrastructure and housing
pro2ects. %enewal energy pro2ects be brought under the scheme, to help reduce
costs, and give boost to green energy ventures, in line with our resolve made at
.openhagen to control carbon emissions. Software technology parks, mostly in
mofussil areas and away from metros have greater employment potential than
I-S$FS, C?I.? 5%$ $.?;EGE#H +%II$;. 5ccordingly, the S9I units,
granted direct tax exemption on exports till "arch1&, 67&6 be granted a further
extension of exemption for 6 years-i.e-till "arch 1&, 67&=
++ 5bout %s. (7,777 crores of fruits and vegetable rot away, only about &.3 to 6
4 of it is processed. o create more employment and give a fill up to the rural
economy, the government must announce incentives ) subsidy etc. to promote
the food processing industry especially considering that high local and state
levies have virtually destroyed this industry.
++ here has been a massive increase in foodgrain, edible oil, sugar and
vegetable prices over the past few months. he existing 9+S system has failed,
especially since it is prone to misuse, pilfering and does not cover the homeless
poor, who need it most. he :95 #ovt must fulfill its promise to provide
foodgrains @63kgB at subsidi0ed prices to the poor, including the homeless, and
other essential commodities to *9G families after revamping the 9+S system. Ce
are waiting eagerly for the :95 #overnment to fulfil its promise of introducing
he !ood Security 5ct at the earliest. his is especially since yesterday the 9rime
"inister announced that the food crisis to here to stay.
++ Gast year %s&67 crores was allocated for the :I+ pro2ect. Ce expect at least
another %s (77 crores to be allocated for this nation wide important
identification pro2ect this year.
++ *udgetary allocation for desalination plant near .hennai was made few years
back by "r.9..hidambaram. 5 similar allocation of central grant for desalination
plant near "umbai, the biggest tax paying city of the country be made, since the
financial hub of the country presently reeling under acute water shortage.
++ he ;ational Solar mission offers to buy power at enhanced rates and supply
it to the ;ational #rid and cross subsidi0e the different rates. he existing
condition of cap of units up to &3"C be maintained. 5nother condition be
incorporated that solar photovoltaic cells should be sourced only from domestic
producers to be eligible for the scheme. Such a clause would help revive the
ailing solar 9I. industry, presently all closed or sick, due to cheaper cost
disadvantage up to 374 of .hinese 9I.s. Similar repurchase facilities be
incorporated for all renewal energy schemes, and cross subsidi0ation with other
power fed into the national grid be made applicable, especially for wind power
pro2ects. his is a better way to encourage renewable energy schemes than to
give incentives upfront which past experience in some abandoned wind energy
pro2ects has shown, is liable to misuse.
*,RE.'EFS 5 *4A06ES 5 $'RE*/ /A7A/'-0
++ he section '7 . limit be hiked to %s.&.3 lakh from %s. & lakh for permissible
tax deductions.
++ o make term deposits with banks attractive, eligibility for deduction the
period for deduction be reduced from 3 years to 1 years.
++ .onveyance allowance deduction limit be hiked from %s.'77 per month to
%s.&'77 per month. Salaried employees have to pay tax beyond permissible limit
from 5pril 6778 with retrospective effect. his retrospective levy be nullified, and
tax beyond enhanced conveyance allowance limit be made applicable from & st
5pril 67&7.
++ he rent available for deduction for self employed assessees be enhanced
from %s.6=,777 per year to a more realistic %s.(7,777 per year, in tune with
revised market rates and inflation.
++ %eal inflation rates have hit the salaried sector hard. Some relief be provided
at least for one year only 5H 67&&-67&6, be allowing standard deduction at 674
before introduction of new +irect ax .ode from & st 5pril 67&&.
++ he yearJs inflation, loss of 2obs and loss of purchasing power has hit the
common man very hard. Income ax exemption limits for senior citi0ens, women
and general assessees be increased across the board by at least %s.17,777-
%s.=7,777 per year, , keeping in view, that balance of e<uity with fiscal deficit
concerns has to be addressed in this budget.
++ 5nti avoidance measures to prevent misuse of +55 @+ouble ax 5voidance
5greementB on lines of the .hinese model be incorporated in existing Income
ax 5ct &8(& to prevent re routing of black money through the tax haven,
especially "auritius route. 5 lot of speculative volatility in stock market could be
brought down by this measure in any case, the +. @+irect ax .odeB to be
introduced in 5pril 67&& has similar provisions, and there is no harm of this
provision being made effective from & st 5pril 67&7 itself by announcing this
measure in this budget.
++ 9erks of salaried employees have been made leviable to income tax w.e.f
5pril &, 6778 , with retrospective effect. 9lease make it leviable with prospective
effect from 5pril &, 67&7, otherwise a considerable portion of savings of the
working class will be diverted to meet this unfair burden.
++ *ased on recent ruling in Sumitomo "itsui .orporation case by 55%
@5uthority for 5dvance %uingB an explanation on differentiation between royalty
and business income be inserted in relevant section of Income tax 5ct &8(& to
remove ambiguity on the disputed issue,clogging our tribunals.
++ 9ost Iodafone huge income tax demand, there is lot of ambiguity whether
income tax is leviable on transaction done overseas, but -source of income/ is in
India . he *udget should settle this ambiguity post >arnataka Samsung
decision, and come out with suitable enactments itself, to end protracted
litigation and confusion in matter, which is an impediment to attracting direct
!+I@foreign direct investmentB into India.
$,RE.'EFS5*4A06ES5'0$'RE*/ /A7A/'-0,
++ Service ax levy on fund management services be exempted for the ailing
life insurance sector, to give it a level playing field with the mutual fund asset
management companies and funds managed by the banking sectors.
++ Service tax exemption for exporters in &7 notified services related to exports
be widened further to giving a boost to exports which have suffered as a result
of global recession and increasing transaction costs.
++ $xcise duties and service tax-whether directly or indirectly, on buses used for
public transportation be abolished. :se of public transportation will increase only
if J;;:%" largesse is matched with matching fiscal incentives. 9resently many
transport corporations are running into losses, and tax levies including high state
I5 levies, make it unviable. "any municipalities, especially in smaller towns, do
not have funds to defray their share of cost for J;;:%" buses. 5bolishing excise
duties will reduce cost and kick start the scheme, especially in smaller cities and
towns. 9resently even private contractors are refusing to give buses on hire due
to non receipt of payments and huge losses. 5ll levies relating to public
transportation , whether by rail, buses, or even inland waterways , should be
abolished .his is the only way to de clog our roads, make our cities more
leviable, especially in the metros, and help reduce pollution caused by cars and
autos.
++ "ega 9ower pro2ects have resorted to imports from .hinese suppliers for
e<uipments used in power pro2ects. 5 .ountervailing duty @.I+B of 34 be
imposed, to provide a level playing field for the domestic suppliers especially
*?$G, G, and other entities. he Fero import duty for capital goods imports in
sectors like power , oil and gas, fertili0e mining etc should be matched with
similar incentives for domestic industry to provide a level playing field.
++ .*$. chairman that announced few months back that e filing of service tax
returns will be made mandatory. he process be streamlined and expanded all
over the country since lesser interface with tax authorities and e governance will
reduce scope for complaints and corruption.