MARCH 16, 2012
Budget 2012-13- Is Kubera riding on back of tax payers?
By Somesh Arora, Amicus Rarus Consults, Advocate, Former Commissioner of Customs and Excise
IN Indian mythology , Kubera (The Lord of Wealth) is considered as a Yaksha, who is neither a ‘ Deva' (deity) nor an ` Asura' (Demon). But like most of the Devas, has been allowed a privilege to have a vehicle and interestingly the chosen one for him is human being( Nara), on the back of which he rides. In the modern context, the Government Treasury or Sarkari K ubera also like wise rides on the back of the common man, who is the tax payer. Therefore, to expect that in any budget, the Kubera for the Government, who is the Finance Minister will not ride on the back of the tax payer to collect, more and more revenue in the spirit of “ YEH DIL MANGE MORE” will be rather like indulging in extreme optimism. The budgets, therefore, have to be seen in this perspective only.
All the talk about tax reforms- whether of DTC or GST, will eventually end up in one way only, i.e. garnering more revenue for the ex-chequer. Tax and Budget observers should not, therefore, fail to notice than in early 1990`s, when the Income Tax slabs became liberal, simultaneouly came in the Service Tax. All of us ultimately ended up paying more to various tax reforming Finance Ministers. The only thing which actually happens in any budget exercise is, satisfying some lobby at the cost of the other in one budget and reversing the process in some other budget.
In the whole process, however, hope for segments of industry is raised and the Dal-Roti in Indian context and Bread & Butter in foreign context of media persons, lawyers, politicians, concerned bureaucrats, trade associations and high profile trade bodies keeps going. Therefore, every budget ends up in appeasing some segments for a while, or in incurring displeasure of others or at times, sparing rod for few. The story goes on year to year.
Tax reforms in medium or long term, therefore, always turn out to be a myth for tax payers collectively. The only tax reform that any prudent person familiar with the Government functioning should ever pitch for, is reduction of tax compliance burden and tax procedure simplification. On this philosophical note, I proceed to evaluate the budget 2012-2013:
Cheer Factors:
Income -tax
1. Tax payer exemption limit to be raised to Rs.2 ,00,000 /- from Rs.1,80,000/- .: Just sufficient to narrowly cover the rate of inflation of the last year.
2. Income Tax at 10% for Rs 2-5 lakh . Will leave some disposable income with mid rung tax payers.
3. Savings interest up to Rs. 10,000/- with the banks to be exempted. Reduces a lot of nuisance value for small tax payers, it is surprising why it could not be thought of earlier by the policy makers sitting in the North Block.
4. No change in corporate tax rates.
5. Withholding tax on power, airlines, road and bridges, ports and shipyard, fertilisers , dams and affordable houses lowered to 5 pc from 20 pc for 3 years.
6. Rate of Security Transaction Tax reduced to 0.1%.
7. Income Tax deduction to small retails investors on investing in equities.
8. Rs.5,000/- deduction for preventive health care.
9. Senior Citizen with business income not required to pay advance tax.
10. Turnover limit for SMEs for compulsory tax audit raised from Rs.60 Lakhs to Rs.1 Crore.
Central Excise:
1. Footwear up to Rs.500/- RSP exempted from Central Excise.
2. Duty reduced on Stainless Steel Tubes and wire, refills and inks for manufacture of Pens, Intra Ocular Lense, parts and accessories of Battery Chargers, PC Cables, Memory Cards and Hand Free Head Phone for Mobile Phones, LED Lamps, Iodine, Food Products of Soya, BP and Blood Sugar Monitors (on actual user basis only).
3. Interest no more payable on credit wrongly taken unless the same is utilised.
Service Tax:
1. Multiple Rules under Service Tax likely to be weeded out with framing of new Rules under Negative List Regime to be codified as Service Tax Rules, 1994.
2. Penalty to be waived of, for those who delayed in paying Service Tax on immovable property.
3. For issuance of Invoice, period is being increased to 30 days under Point of Taxation Rules.
4. A common one page Return for Excise and Service Tax to be introduced.
Customs :
1. Customs duty on import of parts of aircraft, tyres and testing equipment fully exempted. – This should keep Kingfisher and others airborne.
2. Full exemption from basic customs duty for equipment for road and highway construction.
3. Import of equipment for fertilizer plants fully exempt from customs duty for three years.
4. Basic customs duty Liquefied Natural Gas (LNG) and Natural Gas (NG) (2711), is being fully exempted when imported for generation of electrical energy by a power generating company .- Comment: This should make Reliance Group happy.
5. No computation of Cess twice while working out CVD under Customs Act.
6. Baggage allowance exemption raised to 35,000/- for Indian passenger and Rs.15000/- for children up to 10 years. – All Indian Pax can now bring baggage in hold-all.
7. Customs duty reduced on Steam Coal, Uranium Concentrate, Cronary Stands parts, Aircraft Tyres , Aircraft Testing and maintenance equipment, Waste Paper, Lithium Ion Batteries, Soya Protein and Probiotics .
8. Minor infirm and women to be granted bail even for offences where more than 3 years imprisonment is provided .- Comment: This is likely to result in change of Sex and age profile of future smugglers .
9. Police can not investigate serious Customs cases, unless authorized by General or Special Order. Comment: This should put an end to duplicity of investigation.
Tear Factors:
Income Tax:
1. TDS to be deducted on purchase of Gold Jewellery, Sale of Immovable Property etc.
Central Excise:
1. Standard excise duty rate raised from 10 per cent to 12 per cent. Across the board increase as a pre-cursor for higher GST rate to follow.
2. Even unbranded gold jewellery covered under Central Excise and to bear tax rate of 1%. SSI benefit of Rs.1.5 Crore, however, shall be made available for remaining 14 days of the Financial Year on proportionate basis according to a complicated formula.
3. Even persons who get articles of gold jewellery, made on job work are required to get registration and follow procedures.
4. Articles of Silver or precious metals and even metal clad with special metals shall amount to manufacture under Chapter 71- Comment: The cladding with precious metal portion is likely to cause a lot of litigation for the popular one gram gold jewellery.
5. Time limit prescribed within which the units being audited will have to produce the documents. Hope that at least now the Preventive officers of various Departments will return the non-relied upon documents in time.
Service Tax:
1. All services except 17 in the negative list to be brought under service tax net .- Makes the service tax all the more powerful. Little wonder FM talked about it first in order of indirect taxes. Bound to rake up sufficient mullah for the Government, as it is coupled with 2 percent increase.
2. Across the Board increase in service tax rate of 2%, even Railway fare to go up further .- Comment: This should make Mamta Didi frown further.
3. Abatements likely to be brought down with introduction of Negative List.
4. Normal period demand can now be raised up to 18 months.
Customs:
1. Basic customs duty is being increased on gold ores and concentrates for use in the manufacture of gold from 1% to 2% .- The precious metal becomes more precious.
2. For availing SAD on specified goods State of the destination where the goods are intended to be sold for the first time after import and the VAT Registration number required to be declared
3. The basic Customs duty increased on Completely Built Units (CBUs) of Large Cars/MUVs/SUVs, boric acid,Digital cameras, non-steel ally, gold bars and platinum bars and non-standard gold, gold ore for refining, gemstones and on bi-cycles and its parts. (This saves one anti-dumping investigation)-
Fear Factors:
1. Rates of Gutkha and Chewing Tobacco revised upwards, but still the lowest slab starts with Rs. 1/-. Comment: This will further encourage manuacture of Gutkha with spurious supari, as even a pouch without plastic cannot be manufactured at this cost. High levy also likely to lead to greater evasion, Excise Department will have to go on excursions trips to deserts, hills and jungles. Even the slabs for chewing tobacco are erratic and without any rational basis.
2. Rates revised for cigarettes and even bidis increased. Likely to lead to more revenue as well as evasion in case of bidis.
3. Increase in Cess on Crude Petrolium from Rs.2,500/- PMT to Rs.4,500/- PMT likely to raise fuel price and fuel inflation.
4. Backdoor entry to power of arrest under Central Excise Act and Customs by categorising offences as non bailable wherever punishment of more than three or more years is prescribed The power to arrest should be coupled with the same being exercised by responsible and not unscruplous officers. No one wants CBI to visit DGCEI and DRI offices.
It is clearly the Income tax proposals which score in terms of bringing more cheer by putting more disposable income and rationalising tax procedures. Therefore, it has clearly scored, though at the cost of foregoing revenue. Regarding increase in disposable income being made available to the public, following words of Kautilya in the Arthashastra are worth remembering:
"Indulgence in pleasure by the people of the country causes them to consume little for the sake of removal of fatigue and after such consumption leads to application to work once again, whereas, indulgance in pleasure by the Kings afflicts the subjects as he seizes whatever he pleases, demands gifts, for himself and allows the same to his favourites."
Little more for common man therefore is always welcome.