GST (Goods and Service Tax)was the major attraction this budget which the government hopes to introduce this April. Further, the budget saw the tax structure shifting this year as direct taxes back stepped a little from 58.6 % to 56.6 % and indirect tax collections nudged to 42.2 % of the total revenue against 39.5%. Combined state deficit in 2010-11 saw significant drop. The growth in tax revenues seems likely given the recovery in the economy to the pre-crisis levels. Excise duty and service tax at 10% remain static; however, there is an increase on duty of some goods by a nominal 1 per cent.
Well, the FM, refusing to be kind this time withdrew a large number of exemptions while levying 1 per cent excise duty on certain goods additionally. A marked unrest is expected over an option to manufacturers to either pay 1 per cent duty without availing input credit or pay 5 per cent duty or avail of credit of input taxes on goods and services. This could lead to bewilderment on the applicable rate of Countervailing Duty(equal to excise duty)in imports.
New services were brought under the service tax net like diagnostic testing, legal consultancy and expansion in the scope of current taxable services(Life insurance, commercial coaching etc).
Amendments in export import service tax rules and self assessment in the Customs act will help pay appropriate tax.
POT (point of taxation) was another major roll out that will see a shift from payment basis to accrual basis for GST.
The Central Credit rules -2004 has been amended to remove long lasting ambiguities in the system.
“The reduction on surcharge of domestic companies to 5% from 7.5% will boost the growth of indigenous corporate but will only partially reduce the tax burden of the corporate”, shares Mr Yoginder Singh, Chairman, IDSA.
“The overall Union Budget 2011-12 is positive for the auto sector. The auto sector was expecting a hike in excise, which has been kept unchanged at existing levels and proposal to launch national mission for hybrid and electric vehicles will allow advanced technologies to be developed in India. The broader measures like increased focus on rural and infrastructure spending will support long term growth of the sector”, shares Mr. Ratish Ramanujam, the Former CEO and Director of Windshield Expert and an expert on the Automotive after Services Market.
“The corporate tax surcharge decreased to 5% will cheer all businessmen and LPG, Kerosene & Fertilizer subsidy being shifted to cash form ---- can be a huge game changer if implementation is done correctly,” shares Mr. Shiv Inder Singh, Managing Director, FIREFOX.
Except for the concern of excise imposition of 10 % on branded apparel and new services coming under the tax bracket, the tax reforms are extremely positive as long as the deficit/plans are met and the outlined measures are well executed.