| February 28, 2007 |
| The Union Finance Minister Mr. P. Chidambram has presented the budget - prepared in the context of steady growth coupled with increase in prices. On the eve of the Budget, the Government has rightly banned forward trading in food grains which has contributed to the enormous increase in their prices. This is not enough. Strict measures have to be taken to check profiteering and speculation in trading in essential food grains. The Budget rightly addresses the critical issues of rising prices, investments in agriculture and infrastructure said CA. Sunil H. Talati, President, ICAI. While the price rise has to be arrested in the larger interests of the nation, it is also imperative that the growth rate in the economy is maintained. The Budget has given the right emphasis on agriculture which is the crying need of the hour. The announcement of a social security scheme for unauthorized sector is very welcome. Right emphasis has been placed on increase in power capacity, national highway and energy security. |
| Wide-ranging reductions in customs and excise duties have been announced on a variety of products and the reduction in duties on petrol and diesel would curb inflation. The duty cuts may, however, lead to competition from cheaper imported goods. The increase in the exemption limit from 1 to 1.5 crore rupees in the case of small scale industries will give more operational freedom to the small scale sector. The rationalization of excise rate structure in the tobacco industry would perhaps bring more revenue to the Government. The extension of TUF scheme (5% interest subsidy) will give fillip to textile sector and would generate large-scale employment for rural women folk. |
| A welcome relief has been given to small-scale service providers by increasing the exemption limit from Rs.4 lakhs to Rs.8 lakhs. This will obviate unnecessary hassles for the small scale providers. The ICAI feels that the clarificatory amendment that service tax would be exigible on services involved in works contract correctly reflects the legal position.
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| In the field of direct taxes, the small increase in the basic exemption by Rs.10,000 has been more than offset by an additional 1% levy on education cess. The extension of MAT to 10A and 10B companies would augment the revenues only for a short term period, since there are already sunset clauses providing for the discontinuance of the applicability of those sections. |
| The increase in dividend distribution tax from 12.5% to 15% and for mutual fund companies from 20% to 25% probably is an exercise carried out to meet the shortfall arising consequent to withdrawal of surcharge on firms/Companies upto income of Rs 1 crore. However, it may have some consequences for small investors. The further rationalization of the law relating to FBT is welcome as some of the difficulties faced have been addressed. The inclusion of ESOPs in FBT may lead to some debate. |
| It is heartening to note that the electronic filing of return scheme has been a success story. CA. G. Ramaswamy, Chairman, Fiscal Laws Committee of ICAI said that the ICAI is a valuable partner in this exercise and Chartered Accountants have played a significant role in this success story. |
| On the whole, the Hon’ble Finance Minister has been able to adhere to the norms laid down by the Fiscal Responsibility Management Act. He has to be congratulated on this tactful budget exercise presented amongst inflation, constraints of WTO Regime and steady growth. |
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