Wednesday, March 2, 2016

Budget 2016-17

The Budget for the year 2016-17 was presented by our Honourable Finance Minister Shri Arun Jaetli ji amid higher expectations from every nook and corner of the country. If we see whether he fulfilled their expectations and dreams, yes he fulfilled to certain section of people and ignored the aspireness of other section of people.

In a general view I appreciate this budget for its vision on development, futuristic anticipation, visionary of improving infrastructure etc., But it is not at all enough for a 'developing' country like India, and when it is passing a crucial era of transforming itself from 'developing' to 'developed'. To convert the word developing into developed is not an easy task and it requires step by step improvements from the grass root level.

This budget focussed on the development, organisation, re-organisation, beutifying the branches of the tree but not looking into its root, believing that branches are the only responsible for the fruit.

Arun Jaetli (Photo: The HINDU)

Lets speak up openly and look into the 'few' things of the budget.

Starting with a positive note, Budget allocations are really amazing and sounds good, for the National Highways, Mega projects, Railways, Steel Power and Gas Industrial development. Tax incentives for corporate organisations will boost higher economy.

I am so happy on the allocation of funds given to certain areas like, Rs. 55000 Cr for Road Development apart from the Rs. 90,000 Crore alloted to PMGSY which exclusively concentrates on connecting remote rural villages to its nearest towns. Rs. 38,500 Crores for MGNREGA really improves rural employment. I had a fear initially as the BJP opposes this scheme, whether they will discontinue it, but luckily they continues it. Health & Education gets Rs. 1,51,581 Crore however it is so insufficient for us, Defence allocation gets 4% increase compared to last year, Rs. 2,21,246 Crores for Infrastructure Developments and so on.

Looking at the funds allocations it is OK.. but what I really concern about is some amendments and procedural changes. I feel this is the area we have to discuss in short.

100% FDI allowed for Food and Food products which highly gives a slap on Agricultural sector.

Disclosure scheme for bringing black money out and legalizing it by paying 40% as tax to govt will be a disaster. The hard work of Finance Intelligence team and Income Tax department officials goes in vain, as every one can disclose a minimum amount as black and pay tax for that minimum amount. Balance 60% of the 'declared minimum amount' and the entire 'undeclared' amounts become legally white and government assures there won't be any enquiry or assessment in future. This helps the corporate culprits enjoy the black money without the fear of facing legal enquiries.

Long pending Cases of taxation now allowed to settle down by paying 25% of the dispute amount. Moreover, surprisingly government decides 'not to fight' on the cases having dispute amount less than Rs. 5 lakhs, and withdraw all such pending cases. This is another disaster to the economy when we highly really relying on the tax income.

Reduction of Gas cylinders from 12 to 10 is a yorker from FM to the common man.

Diabetes is a concern the government says, and when I am expecting a massive health mission like what we successfully did for Polio & AIDS, government comes with a proposal of opening Dialysis centres and Medical shops. Some thing opening up for private sector for their business, you know?

There are big big dreams about creating large corporate companies, Infrastructures, Highways, Airports, Green field ports, Bullet Trains, Metros... dreams are MEGA in nature but ultimately there is nothing remarkable in the announcements for the rural people and  common man specifically the salaried.

Even though the promises and dreams are so big, when we see the implementation rate of the last year budget is only 37% on the announcements, the fate of the current budget's implementation is doubtful, unless we see them taking off in this fiscal.

The government wants to display India as a highly modernised country to the world, hiding the real factual issues prevailing therein. Portraiting Tajmahal as India is a better idea, but not only Taj Mahal, Taravi is also a part of India. Without developing Taravi, providing basic needs to Taravi, Tajmahal has no moral value. Here TajMahal stands for Corporate development and Taravi stands for common man, as you understood.

My core area of play is in the ground of Indirect Taxation and let me explain my views on it.

I highly expected about the changes in taxation area ahead of GST as the government was often says they are implementing GST soon. But there is no symptoms of GST implementation in near future. If the government really keen on implementing GST, it should have reduced the number of taxes in par with GST. But this government is adding the complicity of the taxation and imposing new new taxes in this budget. What I expected is subsuming and consolidation of taxes, whereas the government now expands the tax complication.

As expected in my previous post Service Tax was expanded to cover many new areas. One of them is the Service tax on the Services provided by the Government or the Local authorities to the business unit. This may include Electricity, Road, Water, drainage etc., For the first time, Government 'services' are coming under tax liability and I guess its impact on business will be huge.

This government was seriously concerned about the decline in Exports, they say, so I expected some sops for exports. Nothing found in the budget. The Drawback rates, MEIS incentives were unchanged. Then what is the real meaning of 'seriously concerned' and sufficient steps taken to improve exports??

Some procedural changes I liked the most. For example, Credit for Capital goods less than Rs. 10000 per piece can be availed fully, Capital equipments can be moved to Job worker directly and avail credit, Reduction in No. of Returns to be filed for Excise & Service Tax, Common Ware house with Input Credit facility for business having multiple place of business, Removing complicity of Service Tax availment for Exempt and non-exempted goods manufacturing are good for making business with ease.

As suggested in my previous post, government has taken initiatives to withdraw the service charges for Debit/Credit card transactions to bring all financial transactions of an individual in books. A separate Notification was released on this issue.

Rationalisation of Interest and Penalty rates, extending time limit for availing Service Tax Credit, Extending time limit for applying Rebates are also good move.

But on the other hand, there are some disappointments also from the expectations of the business circle, such as no clarity on the amount of CESS lying accumulated prior to 28th Feb 2015, whether it can be utilized or not, Procedural difficulties in Service tax to be reduced, Applicability of Service Tax in many areas are not clarified etc.,

LTU was having the facility of mobilizing its CENVAT & Service Tax credit within their group which increased the group's cash flow, but this facility was stopped in July 2015. The expectation that this budget will re-enable it was gone in vain. Actually the purpose of LTU itself was defeated.

There is no specific incentive schemes or improvements for EOU / SEZ units. Procedural hardness of doing SEZ business was not sorted out, and hence many SEZ projects are lying vacant. Some are withdrawn.

Overall seeing, this budget is good for corporates and corrupts but highly affect the life and cost of common man and salaried. Bigger dreams and sweety promises were in the Budget but there is no action plan or proposed procedure to increase the economy not found.

GDP for this year is reduced to 7% as against 8%, and that says it all.

We are now facing an economic recession but this budget which is having only expenditures in majority and not investments or revenue generation plans, will make the economic recession into an economic disaster.

Let us see what is the course of action in future.


1. Budget 2016-17 - Official text of Finance Minister's speech
2. Budget highlights and Key features released by Finance Ministry
3. Finance Bill 2016-17
4. Changes related to Service Tax

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