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FM burdens common man with education cess
For aam aadmi, asserts FM
Service tax net widened
Bima yojana for aam aadmi
Rs 2,736.17 cr more for home affairs
No cut in petrol, diesel prices
Social sector given top priority
Budget fails to ring for telecom sector
Mixed reaction on push to agriculture
BCTT limit up
Zing missing
CPM may move cut motions
Divestment may fetch Rs 41,651 cr
Scholarship plan to check dropout rate
Cigarettes to cost more
Tax holiday for J&K units
States to get more
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FM burdens common man with education cess
New Delhi, February 28 The Budget proposal for 2007-08 also did not enthuse the salaried class, as he proposed a meagre increase of Rs 10,000 in threshold tax exemption limit. Chidambaram proposed raising the threshold limit from Rs 1,00,000 earlier to Rs 1,10,000, dashing the expectations of individual taxpayers. The Rs 1,000 income tax relief that would accrue to income taxpayers due to enhancement of the threshold limit is bound to get substantially neutralised due to increase in the education cess from the present 2 per cent to 3 per cent, as the cess has to be paid not only on income tax but also on all products and services covered under excise, customs and service tax. The hike in education cess would yield an additional revenue of Rs 5,300 crore, the finance minister said. The budget proposes to increase the income tax exemption limit from Rs 1,00,000 to Rs 1,10,000. For women, the exemption limit has been raised from Rs 1,35,000 to Rs 1,45,000, and for senior citizens from Rs 1,85,000 to Rs 1,95,000. If this was not enough, the finance minister has also put additional burden on taxpayers investing in the stock market by raising the dividend distribution tax from 12.5 per cent to 15 per cent. Though this tax will be paid at the company end, this is bound to reduce the return on investment at the hands of the investor, as there will be less dividend payout by companies. Chidambaram also dashed the hopes of the corporates, who were expecting at least 3 per cent cut in taxes, by raising the education cess from 2 to 3 per cent. Corporates will now effectively pay a tax of 33 per cent. However, the finance minister gave relief to small and medium enterprises by removing the surcharge on income tax on all firms and companies with taxable income of Rs 1 crore or less, which would benefit an estimated 12 lakh firms and companies. The tax paid by corporates includes 30 per cent tax on income, 10 per cent surcharge and 3 per cent education cess and the segment with a proposed collection of Rs 168,401 crore would account for more than one-third of the total revenue receipts of the government in 2007-08. The surcharge would continue to be levied at 10 per cent rate on tax on fringe benefits irrespective of the amount of fringe benefits. Besides, Chidambaram has also proposed to levy fringe benefit tax on stock options offered to the employees as well. The stock option to employees is prevalent more in the information technology and finance sectors. In case of dividends distributed by mutual funds, the dividend tax has been raised to 25 per cent on all investors. However, the companies engaged in gas distribution and navigation channels in sea would get tax relief, as Chidambaram has proposed to extend the tax holiday to them at present available to infrastructure sector. Chidambaram preferred to retain the banking cash transactions tax (BCTT) by proposing to raise the exemption limit for individuals and HUFs from Rs 25,000 to Rs 50,000. While, the minister did not effect any change in the service tax rate, he brought into the service tax net six new categories, including asset management services provided by the individuals, design services, renting of immovable property for use in commerce or business, development and supply of content for use in telecom and advertising purposes and services outsourced for mining of mineral, oil or gas. He also announced reduction in CST from 4 per cent to 3 per cent with effect from April 1, 2007, in line with the roadmap for introducing a national-level goods and services tax (GST) with effect from April 1, 2010.
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For aam aadmi, asserts FM
New Delhi, February 28 “What is there in it that is not for the aam Aadmi? If I offer scholarships, social security and insurance schemes, is it not for the aam aadmi? I don’t look at it as to what is in it for you but for the national good,” Mr Chidambaram said while addressing the customary post-Budget press conference here. Asserting that agriculture was the main plank of the Budget, he said, “In my view, industry and services are doing well, growing by double-digits. Therefore, the attention is turned towards agriculture in this Budget.” Flanked by top officials of the finance ministry, he said, “It is the plant that needs nursing and not the strong oak tree. Therefore, I have given huge amounts to agriculture. Corporate tax and service tax have remained stable in the Budget and I have given tax exemptions to SSIs.” On inflation, he said if needed, the government would take further measures to tame rising prices. “When we took over, the inflation had crossed 6 per cent mark. Earlier, too, inflation was moderated and this time also we will moderate it,” he said. Supply side management would be the key to checking the surge, he pointed out. When pointed that the corporates were not happy over non-reduction in tax for them, he shot back saying, “Our analysis shows that the effective rate of tax paid by all corporates, thanks to numerous tax concessions and exemptions - several of them well-intended - was only 19.2 per cent.” Asked how much the government would muster by way of enhanced education cess, he said all taxes taken together, around Rs 5,000 crore more was expected to be collected in 2007-08. He also clarified that the ad valorem cut in petroleum duty would not result in cut in retail prices of petrol and diesel. “This is built in the earlier price cuts that were passed on to consumers 15 days back. At that time, the ministry had agreed to provide for 50 per cent of the cut in the revenue side. So, the hit will be mainly on the revenue,” he said.
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New Delhi, February 28 “Dus hazaar rupaye diya to hain, aur kya dein. (We have given you Rs 10,000, what more should we give?),” the Prime Minister said. “Aapko har saal exemptions chahiye. Humnein exemptions diye to hain. (You want exemptions every year. We have given you exemptions this year),” he said. The Prime Minister was apparently referring to the rise in the threshold limit by Rs 10,000 each for individual taxpayers, women and senior citizens to Rs 1,10,000, 1,45,000 and Rs 1,95,000, respectively.
— PTI
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New Delhi, February 28 The revenue loss from the hike in the exemption limit will be Rs 800 crore, Chidambaram said while presenting the Budget for 2007-08, adding that he was happy to give this sum away in the interest of small service providers and consumers. He proposed to extend the service tax to services outsourced for mining of minerals, oil or gas, renting of immovable property for use in commerce or business, development and supply of content for use in telecom and advertising purposes, asset management services provided by individuals, and design services. Service tax will also be levied on services involved in execution of a works contract. Chidambaram also made a proposal for an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the
contract.— PTI
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New Delhi, February 28 “The new scheme is to cover rural landless households which have no insurance cover at all today. The head of the family or one earning member will be insured,” finance minister P. Chidambaram said in his Budget speech. According to an NSSO report, 1.5 crore households fall under such category. The central government will bear 50 per cent of the premium of Rs 200 per year per person, he said, adding that state governments should come forward to pay the rest of the premium on behalf of the beneficiaries. Taking into account the annual cost to the central government, the finance minister proposed to place Rs 1,000 crore in a fund maintained by the LIC. The scheme would be finalised in consultation with the state governments and implemented in 2007-08.
— PTI
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Rs 2,736.17 cr more for home affairs New Delhi, February 28 The ministry has been allocated Rs 22,622.49 crore with special focus on modernisation of the police and the paramilitary forces, including acquisition of aircraft and boats. The CRPF has got an additional Rs 393 crore. The BSF got Rs 313 crore more this time. Likewise, the CISF was allocated over Rs 100 crore more. The Budget earmarked Rs 119 crore more for modernisation of the police force.
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SCs/STs to benefit New Delhi, February 28 Finance minister P. Chidambaram said in respect of schemes with at least 20 per cent of benefits earmarked for SCs and STs, the allocation had been increased to Rs 17,691 crore. The allocation under Rajiv Gandhi National Fellowship Programme for SCs, STs studying in M.Phil and Ph.D courses has been increased from Rs 35 crore in 2006-07 to Rs 88 crore in 2007-08. The provision in the post-matric scholarship programme for SC/ST students have been increased from Rs 440 crore to Rs 611 crore. A separate provision of Rs 91 crore for similar scholarships to students belonging to socially and educationally backward classes has also been proposed.
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No cut in petrol, diesel prices
New Delhi, February 28 The minister has reduced the excise duty on petrol and diesel from 8 per cent to 6 per cent. “The February 16 reduction in prices of petrol by Rs 2 a litre and diesel by Re 1 per litre was done on the premise that the government will share part of the cut by way of duty cut. As the Budget was around the corner, no duty adjustment was done then. Today, while presenting the Budget, the minister fulfilled that promise,” petroleum secretary M. S. Srinivasan told reporters. “The excise duty cuts would have translated into a Rs 0.47-0.48 cut in a litre each of petrol and diesel prices, but since the February 16 reduction was done despite oil companies losing Rs 1.35 a litre on diesel, the cut is not being passed on to the consumers,” Srinivasan added. After the price cut, under-realisation on diesel widened to Rs 2.35 a litre. On petrol, the companies were making Rs 2 a litre profit which was wiped out by the price cut. For the industry, the excise duty cut would mean about Rs 2,500 crore less in losses on fuel sales. Petroleum minister Murli Deora said the move would not further cut the fuel prices as it was already reduced. The oil industry is also happy on the reduction of CST by 1 per cent. This will assist in inter-state movements of petroleum products in a cost-effective manner.
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Social sector given top priority
New Delhi, February 28 Social services, including education, housing and nutrition, have the largest claim of Rs 83,950.69 crore on the total Plan allocation, while the transport sector has been given the maximum increase of 43.7 per cent in the outlays. With an increase of over 15 per cent in the Budget allocation, the energy sector has a provision of Rs 79,158.45 crore. The transport sector has been provided the third largest pool of resources of Rs 71,589.02 crore to be spent on development of railways, ports, shipping, civil aviation, roads and bridges and inland water transport.
— PTI
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Budget fails to ring for telecom sector
New Delhi, February 28 “The Department of Telecom will constitute a committee to study the present structure of levies on the telecom industry to simplify the tax structure,” Chidambaram said. Although the industry’s demand of lower levies was not met in the Budget, certain sections felt encouraged by the fact that some steps have been taken in this regard. Total levies, including licence fee, service tax and spectrum charge, on the telecom sector is about 26 per cent of the revenue, the highest compared to other Asian economies. A long-standing demand of the telecom sector has been the rationalisation of levies and a uniform revenue share licence fee at a nominal level for all telecom circles to 6 per cent from the current 6 to 10 per cent. Reduced levies would mean passing on the benefit of lower tax to customers, who pay about 30 per cent of their bills directly or indirectly, as taxes and levies. The industry wanted a single levy and simplifying the present structure of multiple levies.
— PTI
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Mixed reaction on push to agriculture
Chandigarh/New Delhi, February 28 Punjab has gained infamy for having the third largest extent of indebtedness in India, after Andhra Pradesh and Tamil Nadu, with the highest magnitude of indebtedness in rural households in the country (with per capita debt of Rs 41, 576). In Haryana, too, over 53 per cent farmer households are under debt, with an average outstanding loan of Rs 26,007. The finance minister announced that agriculture has to top the agenda of the policy planners. “This is an inclusive Budget, aimed at including the agriculture sector in India’s march to growth. The additional flow of credit to agriculture sector would mean that the farmers would be saved from the clutches of the private money lenders, who were charging very high rates of interest, 25 - 30 per cent,” said chairman of the Punjab State Farmer’s Commission G S Kalkat. Bankers say they are now geared up to deal with financial inclusion of 50 lakh farmers, as laid down in the Budget. General manager, Canara Bank (Punjab, Haryana, Himachal Pradesh and Jammu and Kashmir) Y. L. Madan said the Budget proposals would lead to an easy flow of credit to the agriculture sector. However, there are others like senior agro-economist and former vice-chairman of the Planning Commission, Punjab, S. S. Johl felt that the increased flow of credit would require a more vigilant monitoring of its use by the farmers. As the farmers are prone to use farm credit for non-productive purposes, the success of institutional financial inclusion would largely depend on its regular monitoring. At Kangra in Himachal Pradesh tea farmers are upbeat about the creation of the special purpose tea fund to rejuvenate tea production. President of the Kangra Valley Small Tea Planters Association K. G. Butail said the initiative would help revive the tea industry here, as 90 per cent of tea holdings had been abandoned. The decision of the government to ban future contracts in wheat and rice has been criticised by agri-economist P. S. Rangi. “This will go against the farmers of Punjab who are getting Rs 825- Rs 850 per quintal of wheat for April whereas the MSP for wheat is just Rs 750 per quintal. Meanwhile, the corporate sector called for more aggressive and radical measures to give agriculture a big push. The India Inc said: “While these initiatives will bring about a positive impact on the farm sector, however, a much more aggressive and radical measures were expected to provide the big push in the farms sector, especially in proving the fiscal inputs to link the Indian agriculture to markets, which alone can unleash the sector’s potential.” “We were expecting a lot more in areas like scaling up of Indian agriculture through private investments and PPPs in agri production, post harvest infrastructure, cold chain infrastructure, extension, R&D and processing,” the Confederation of Indian Industry said. Chairman, CII Food Processing Committee, Piruz Khambatta said while massive allocation to agriculture is welcome the “multiplier effect” of “processing” has not been recognised. Food processing could provide huge benefit to rural India.
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New Delhi, February 28 Finance Minister P. Chidambaram said the exemption for individuals and Hindu undivided families for the BCTT had been raised from Rs 25,000 to Rs 50,000. Cash withdrawals by Central and state governments had been excluded from this scope, he said. Appreciating the BCTT as a useful tool to track unaccounted money, he said it would be possible to review the tax next year as other instruments became more effective.
— PTI
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New Delhi, February 28 Despite his stewardship of the Finance Ministry ensuring record growth rate for the past three years, he did not beat drums about it nor talked much about issues like economic reforms. The shadow of the poor show in elections and criticism in a section of the party and the UPA appeared to have an effect on him as rising prices were blamed for the reverses. Chidambaram, who usually regales in witticisms and repartees, was, however, a “straight” man today, going about his task in what people felt in humdrum and listless manner. In his hour-long speech, he quoted only once from Thiruvalluvar unlike in the past when he used to recite couplets of the Tamil saint poet. He saw to it that he was away from political hot potatoes like SEZs and disinvestment. A ruling party leader remarked that Chidambaram's presentation would have been much different had the poll verdict come two days later. Shiv Sena MP and former union minister Suresh Prabhu pithily observed that Chidambaram went on to please all and ended in displeasing everyone.
— PTI
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New Delhi, February 28 “We will move amendments to the Budget,” party politburo member Sitaram Yechury told reporters here, making a scathing attack on the way the government has “ignored” concerns of the Left parties on agriculture, employment and other issues affecting the common man. When asked whether they would move cut motions, Yechury said his party wanted more allocation for several sectors and a cut motion was meant to slash allocations. “We will move amendments to the Budget. We want correctives to be carried out by the government.” Yechury did not specify in what manner they would move the amendments. Observing the government had become “a victim of fiscal fundamentalism”, the CPM leader said the ruling coalition had “lost an opportunity” to uplift the poor at a time when the economic fundamentals were strong.
— PTI
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Divestment may fetch Rs 41,651 cr
New Delhi, February 28 But buried deep in the receipts Budget is the sum that will come from sale of shares in public sector companies. At Rs 41,651 crore, this is the highest since the disinvestment process started a few years ago and more than the combined amount since 1998-99 till this financial year. The proceeds from disinvestment would be a part of capital receipts, which will go to National Investment Fund. The government had earlier raised Rs 16,953 crore through this route during 2003-04, when the BJP-led NDA was in the saddle. However, proceeds from divestment under the government of the Left-backed UPA coalition stood at Rs 4,424 crore and Rs 1581 crore in 2004-05 and 2005-06 respectively. Last year’s revised estimates say that government raised Rs 529 crore in this fiscal from sale of its holding in PSUs.
— PTI
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Scholarship plan to check dropout rate
New Delhi, February 28 Finance Minister P. Chidambaram said eligible students studying in Classes IX to XII would be given Rs 6,000 per year. Besides, one lakh scholarships would be awarded every year, he said. In order to fund this programme, a corpus fund of Rs 750 crore would be created and a like amount would be added to the fund every year over the next three years, Chidambaram said. The government proposes to increase the allocation for school education by about 35 per cent. An amount of Rs 23,142 crore has been allocated in the Budget for 2007-08, out of which the Sarva Shiksha Abhiyan (SSA) would be provided Rs 10,671 crore.
— PTI
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Cigarettes to cost more
New Delhi, February 28 In the Budget 2007-08, excise duty on all kinds of food mixes, including instant mixes, is proposed to be withdrawn. “I can no longer be accused of being partial to idli and dosa mixes,” Mr Chidambaram said, in a lighter vein.
— UNI
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New Delhi, February 28 Undertakings in Jammu and Kashmir currently enjoy a tax holiday that is due to end on March 31 this year. Now the benefit will continue up to March 31, 2012.
— PTI
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States to get more
New Delhi, February 28 Finance minister P. Chidambaram has also proposed to allocate Rs 1,06,987 crore in terms of grants and loans in the next financial year compared to Rs 90,521 crore in 2006-07. States and union territories will be
transferred 30 paise of each rupee received or earned by the Centre, according to the Budget proposals.
— PTI
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