New Delhi: Finance minister Arun Jaitley on Saturday unveiled a Budget that sought to push growth by proposing to cut the corporate tax rate by five per cent over four years to make India competitive with Asean economies and increased public spending.
He sought the happiness of people while quoting the Upanishad Om sarve bhavantu sukhinah... Sarve santu niraamayaa... Om shaantih shaantih shaantihi (May all be happy, may all be free from illness, may all see what is beneficial, may no one suffer).
He abolished wealth tax, but introduced an additional two per cent surcharge on the super-rich with annual incomes of over Rs 1 crore.
To balance pro-corporate steps with pro-poor measures, Mr Jaitley, in his first full-fledged Budget, announced a slew of low-cost pension and insurance schemes, including Atal Pension Yojana, Pradhan Mantri Jeevan Bima Yojna and Senior Citizen Welfare Fund, among others.
The middle class and the salaried, were left high and dry, with a token hike in tax exemption on health insurance and an additional tax deduction of Rs 50,000 for contributions to the New Pension Scheme. There was no hike in the personal income-tax exemption limit this time.
What will, however, pinch them a lot more is the hiking of the service tax rate from 12.36 per cent to 14 per cent, which will make more expensive a host of services, from mobile phone bills, eating out at restaurants, air travel, cable and DTH services, visiting beauty parlours, courier service, credit and debit card-related services, among others.
Late Saturday evening, the state oil marketing companies also steeply raised petrol and diesel prices by over Rs 3 per litre due to an increase in the international price of crude.
Mr Jaitley also proposed a two per cent Swachh Bharat cess, which will be imposed on selected services on a future date.
The finance minister pushed the fiscal deficit target of three per cent by one year to 2017-18, and set a fiscal deficit target of 3.9 per cent for 2015-16. He sought to use the fiscal space to push public spending, since private investment is down.
In a bid to address the concerns of FIIs and foreign investors, Mr Jaitley exempted their income from MAT and reduced the rate of income-tax in royalty and fees for technical services from 25 per cent to 10 per cent. He allowed overseas investments in Alternative Investment Funds (AIFs) — a new class of pooled-in investment vehicles for real estate, private equity and hedge funds, among others.
Former finance minister senior Congress leader P. Chidambaram was quick to describe the Budget as a “pro-corporate” one that was “unkind to the poor”.
To tackle the problem of black money, Mr Jaitley has proposed to bring a tough law to check flow of black money abroad, which will include rigorous imprisonment of upto 10 years. The finance minister junked Direct Tax Code, a high-profile direct tax reform proposal that was pushed by the UPA government.
“People who urged us to undertake ‘big bang’ reforms also say that the Indian economy is a super giant, which moves slowly but surely,” said Mr Jaitley in his speech. He also announced an overhaul of monetary policy, a bankruptcy code and the creation of a new public debt management agency. Mr Jaitley has proposed to introduce the long-awaited Goods and Services Tax from April 2016, which will be a major indirect tax reform. He proposed to raise funds for the railways, roads and irrigation sectors by issuing tax-free infrastructure bonds.
The net impact of all direct and indirect tax proposals in the next fiscal will result into a revenue gain of Rs 15,068 crores for the government. While direct tax proposals will lead to a revenue loss, indirect taxes will be in surplus. “My direct tax proposals would result in revenue loss of Rs 8,315 crores, whereas the proposals in indirect taxes are expected to yield Rs 23,383 crores. Thus the net impact of all tax proposals would be a revenue gain of Rs 15,068 crores,” Mr Jaitley said.The gross tax revenue in 2015-16 is estimated to rise by 15.83 per cent to Rs 14.49 lakh crores, up from Rs 12.51 lakh crores in 2014-15 (as per revised estimates). From non-tax revenue sources, the total mop-up is estimated to rise 1.79 per cent to Rs 2.22 lakh crores. As per the revised estimaates for current fiscal FY15, it is pegged at Rs 2.18 lakh crores.
The government on Saturday proposed raising Rs 69,500 crores from disinvestment and strategic saled in state-owned companies.
