The Wish List

The Union Budget of FY2011-12, presented by the Finance Minister Mr. Pranab Mukherjee, resulted in the market going up by close to 3% and breathing a sigh of relief for not having been burdened with more taxes or duties. Ofcourse, there was nothing to rejoice about at the same time. But at least status quo does not imply being worse, if not better!

The expectations from the Budget of FY2012-13 are low and the stage is set with the monetary policy review dampening the sentiments of the markets today. While the expectations are really low, wishlist from the Budget is long. And that might work in Mr. Mukherjee’s favor, if his budget shows even a slight sliver of hope for reforms.

Everyone wants this budget to be “not a populist maneuver”, but in the same breath, they roll out a series of exemptions and sops that they wish for from the budget. One thing is for sure. This budget will not be a populist maneuver, because whatever Mr. Finance Minister does, he will not be able to satisfy everyone. The table below is an example of the wish list of a few industries.

Sector

Wishlist

Cycles *Abolition of all duties
Infrastructure *Revive power sector. Extend benefit under Sec. 80IA *Exemption from MAT.*Lift the $30 bn annual cap on External Commercial Borrowing temporarily.*Take a call on the no-go criterion for the coal blocks.*Bring more private players into mining
Health Care *Import duty cuts on import of equipments, drugs and chemicals.*Declare it a ‘National Priority Sector’.*Make it a part of the infrastructure sector so that it can avail loans for infrastructure financing institutions.*Increase the medical reimbursements exemption limit from Rs15,000 to Rs1,00,000/-
Viscose Rayon *Reduce excise duty from 10.3% to 0.* Retain S.A.D in lieu of Sales Tax.
Branded garment *Remove 10.5% Central Excise Duty.*Refund of Excise Duty on lines similar to refund of duties of input and finished goods.
SSI *Increase in exemption limit from Rs1.5cr to Rs5cr.
MSME *Provide more reliable and accessible internet broadband.
Real Estate *Single-window clearance mechanism for real estate projects.*Better clarity on the indirect taxes being levied on developers. *Development of a viable Real Estate Investment Trust (REIT).*Make rental business attractive for investors.

Source: Compiled from various industry associations and news reports

 

As we can see, almost every industry wants tax sops to continue, duties and taxes to reduce or be removed. But the finance minister has no magic wand and must tackle the burgeoning fiscal deficit. Hence, exemptions and indirect-tax reductions may seem farfetched. Though, the budget may actually pave way to implement the Direct Tax Code (DTC), taking at least small strides this year.

Increasing the personal income tax limit from Rs1.8/1.9 lakhs to Rs3 lakhs, increasing the Sec80c exemption limits, hiking the slabs for tax rates will all put more disposable income in the kitty of the common man.

Rising inflation, rising prices of food, petrol, LPG, had the households scrambling to cope throughout the last year and they do not expect this year to be different. The common man is worried about the sky rocketing education and healthcare costs, rising housing costs and declining amenities. They are looking at Mr. Pranab Mukherjee to ensure that they can plan their monthly budget with more precision and have improved standards of living.

Create capacities, reduce wastage, improve infrastructure, to increase supply in the agricultural sector. Have more clarity on the prices of fuel. People are confused. Are the Oil prices really independent? Will the diesel prices be deregulated? Why are we paying more and getting less of everything?

All these questions concern the common man and giving income tax sops alone may not be enough to enthuse them to vote you back Mr. Finance Minister.

Leave a Reply

Your email address will not be published. Required fields are marked *