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Suggestions for Budget 2012-13

Source : BUSINESS_STANDARD
Last Updated: Mon, Feb 13, 2012 04:22 hrs
​Budget must restore confidence in India growth story

This year, the Budget will be presented amidst growing concerns of slowing economic growth, a widening trade and current account deficiand a sluggish global economy.

At a time of falling GDP growth, the case for boosting revenue by increasing the tax rates is weak. The present peak customs duty rates, excise duty rates and service tax rates should be left undisturbed. Widening the tax base by taxing all services, except a few on a negative list, and revival of a flagging economy should result in significant growth in revenue. There is a strong case to revisit the suggestion of Yashwant Sinha, former finance minister, that all imported goods other than those covered under trade agreements must suffer a minimum five per cent duty.

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Such a move has the potential to rationalise the tariff rates, purge many exemption notifications and garner more revenue. It will cut unnecessary paperwork and reduce discretion of assessing officers, leading to lesser corruption. Sukumar Mukhopadhyaya, former member of the Central Board of Excise and Customs, had suggested introduction of suitable entries in the customs exemption notification to eliminate the need to issue advance authorisation, EPCG authorisation, etc. The finance minister should consider such suggestions seriously because such measures to simplify the processes will significantly reduce the scope for corruption at various levels.

Last year, the finance minister imposed Minimum Alternate Tax (MAT) on Special Economic Zone (SEZ) developers and units, which contributed to a sharp deceleration in investments in SEZs. While the commerce ministry is considering various measures to dilute the conditions for setting up an SEZ, the least the FM can do is remove MAT for SEZ units and developers. Similarly, the exemption on Dividend Distribution Tax for SEZ developers should also be restored.

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Under the exemption notification 8/2003-CE dated 1.3.2004, manufactures need not pay excise duty till their domestic clearances reach Rs 1.5 crore, provided the previous year's clearance did not exceed Rs 4 crore. These threshold limits deserve to be raised to Rs 2 crore and Rs 5 crore, considering inflation and the marginal effect on revenue due to such relief to small manufacturers. On similar considerations, the limit for service tax exemption can also be raised to Rs 12 lakh from the present Rs 10 lakh to help small service providers.

Cheaper credit for all sectors has been a consistent demand from exporters. Similarly, the process of getting timely refunds of unutilised Cenvat credit or service tax on export-related services has been vexatious. After abolition of the Duty Entitlement Passbook Scheme, many items have suffered a severe cut in their drawback entitlements and in many cases, the value caps prescribed are also unrealistic. Recently, a scheme was introduced to refund service tax on export-related services at pre-determined rates on an automatic basis but at the ground level, there are difficulties in getting the refunds or even excise rebates.

Email: tncr@sify.com



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