New Delhi, Mar 16: In a Budget that raised fears of furthering inflationary pressures, Finance Minister Pranab Mukherjee today hiked excise duty and service tax by 2 per cent across-the-board to raise Rs 45,940 crore while offering marginal relief to individuals in income tax foregoing Rs 4,500 crore.
Prices of all non-oil goods are likely to go up on account of the 2 per cent raise in the effective rate of excise duty of 10 per cent and service tax as well as on account of the widening of tax net to all services, except 17.
Quoting from Shakespeare's immortal words in the ‘Prince of Denmark' that “I must be cruel only to be kind”, Mukherjee sought to raise an additional Rs 27,280 crore through customs and central excise levies and Rs 18,660 crore through service tax.
While the Opposition slammed the Budget as inflationary that will further burden the common man, a view shared by the corporates which found in it a missed opportunity, Prime Minister Manmohan Singh and Mukhejree said it will help in fiscal consolidation and take the economy on growth path.
The Budget left untouched the corporate taxes and the peak customs duty and gave tax concessions to infrastructure sectors like power, airlines, road and bridges and hospitals, cold-chain facility and affordable housing.
Mobile phones, branded silver jewellery, branded garments, imported LCD and LED TV panels of over 20 inch and matches will be cheaper on account of duty reduction while two-wheelers, cars, refrigerators, air-conditioners, washing machines, watches, soaps, cigarettes and bidis, air travel, pan masala and chewing tobacco, gold and unbranded metal jewellery and imported bicycles will cost more.
Providing marginal sops to the salaried class, the Minister proposed a tax relief up to Rs 2,000 for those at the threshold stage by raising the exemption limit from Rs 1.8 lakh to Rs 2 lakh.
The upper limit of the 20 per cent tax slab is being raised from Rs 8 lakh to Rs 10 lakh. Those with income above Rs 10 lakh will continue to pay 30 per cent tax.
In addition, a deduction of up to Rs 10,000 has been allowed for tax payers for interest from saving bank account. This would help a large number of small tax payers with salary income up to Rs 5 lakh and interest from saving bank accounts up to Rs 10,000 as they will not be required to file income tax returns.
Within the existing limit for deduction allowed for health insurance, the Budget proposed to allow up to Rs 5,000 for preventive health checkups.
Senior citizens who do not have any income from business are proposed to be exempted from payment of advance tax to reduce their compliance burden.
To the capital market, the Budget had something to offer by way of reducing the Securities Transaction Tax (STT) from 0.125 per cent to 0.1 per cent as also announcing a income tax deduction of 50 per cent to new retail investors with income below Rs 10 lakh who invest up to Rs 50,000 directly in equities.
As a measure of support to the ailing civil aviation sector, the Budget fully exempted from basic customs duty imports parts of aircraft and testing equipment and allowing external commercial borrowings of up to USD 1 billion.
Duty-free baggage allowance for Indian air travellers has been raised from Rs 25,000 to Rs 35,000 and for children up to 10-years from Rs 12,000 to Rs 15,000.
Flowing out of the adverse verdict in the Vodafone tax case on sale of capital assets located in India outside the country, the Budget seeks to amend the Income Tax Act retrospectively from 1962 to bring under the scanner 50 year old deals.
The proposal has come under attack from the corporates which said that it was retrograde and the government does not seem to learn lessons.
In a bid to tackle the menace of blackmoney, the Budget proposes amendments in law to compulsorily report assets and revenue held abroad and allowing for reopening of assessments up to 16 years in such cases.
Other measures include tax collection at source on purchase in cash of bullion or jewellery in excess of Rs 2 lakh, transfer of immovable property and trading in coal, lignite and iron ore.
The additional resource mobilisation in this Budget breaks the practise in the last few years of being low on fresh taxes, expect in 2010-11 when the net gain was Rs 20,500 crore.
Gross tax receipts for 2012-13 are estimated at Rs 10,77,612 crore, an increase of 15.6 per cent over budget estimates and 19.5 per cent over the revised estimates for 2011-12.
Total expenditure for 2012-13 is budgeted at Rs 14,90,925 crore, of which Plan expenditure is Rs 5,21,025 crore and non-Plan Rs 9,69,900 crore.
The combined effect of lower tax and disinvestment receipts and higher expenditure, mainly on account of subsidies, has pushed the fiscal deficit to 5.9 per cent of GDP in the revised estimates for current fiscal.
However, the Finance Minister said, he has made a determined attempt to come back to the path of fiscal consolidation in the Budget for 2012-13 by pegging the fiscal deficit at Rs 5,13,590 crore, which is 5.1 per cent of the GDP.