FM to unveil Union Budget for 2012-13 on March 16th

FM to unveil Union Budget for 2012-13 on March 16th

The Budget Session is usually divided into two parts, with the House going on a three-week recess after the Budget is presented, when the parliamentary standing committees deliberate on the proposals of different ministries. The second part of the session wil begin on April 24 and continue till May 22.

Mr Pranab Mukherjee, reacting to the GDP growth estimate being lowered to 6.9 per cent for 2011-12, called it “disappointing”.

Union Budget 2012-13 Expectations & Highlights:

• The Central government may incentivise the pharma sector to boost the higher spending in research and development and also to lower the taxes and duties on life saving drugs and active pharmaceutical ingredients (API) to offer fillip to the growth of the industry
  
  
• Ministry of Petroleum & Natural Gas has requested the Union Finance Ministry to lower the excise duty on branded diesel in the upcoming Budget due to the strong decline in the sale of the fuel.
  
  
• Union Budget 2012 is expected to witness Union Finance Minister Mr Pranab Mukherjee attempt to push the entrepreneurs for more investment by introducing major investor-friendly policies.
  
  
• Centre may unveil a series of measures in the Union Budget 2012-2013 to help the export sector and also the micro, small and medium enterprises (MSMEs) in India.
  
  
• Association of Biotechnology Led Entrepreneurs (ABLE) has demanded various fiscal and tax incentives from the Union Budget.
  
  
• Centre is planning to increase the income tax exemption for up to Rs 3 lakh paid as interest on housing loans in one year as compared to the current limit of Rs 1.5 lakh with the aim to strengthen housing sector credit.
  
  
• The tax exemption slab is expected to be increased from the present Rs 1.8 lakh to Rs 3 lakh, in case the proposed recommendation of a Yashwant Sinha-led parliamentary standing committee on finance get cleared in the Union Budget for the year 2012-13.
  
  
• Agriculture Ministry has demanded lowering of interest rate on crop loans to 3% for those farmers who pay in time, from the existing 4%.
  
  
• The micro, small and medium enterprises (MSMEs) sector is seeking separate consultations with them in the run-up to the Union Budget 2012-13.

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Expectations from Union Budget 2012-13:

a) Relaxation in service taxes.
b) Tax reforms like implementation of GST and DTC.
c) Subsidy on Gas, Oil, Fertilizer, Food etc.
d) Subsidies in FDI norms in sectors like Retail, Media and BFSI etc.

Budget 2012: Govt mulls hiking excise duty to 12%

NEW DELHI: The finance ministry is considering a proposal to increase excise duty from 10% to 12%, although still lower than the level before the 2008 financial crisis. The move, officials argue, is aimed at helping the government improve its fiscal situation but it is expected to push up the cost of almost all manufactured goods - from food products to consumer durables and automobiles.

While a rollback of the stimulus was expected in the last budget, finance minister Pranab Mukherjee surprised the industry and the market by sticking to 10% standard rate of central excise. His calculation was that his finances were healthy and some more support to the manufacturing sector would only help. Since then, the economy has turned more fragile, with industrial production rising in low single digits. The Centre's fiscal health is even more problematic. In addition, an increase in excise duty will add to the inflationary pressure, especially in the manufactured goods segment where prices rose by over 9% on last count.

Although a final decision is yet to be taken, sources in the government indicated that the move has been necessitated by a tight fiscal situation, which is expected to persist during the next financial year with the government in no position to prune the high subsidy bill. A decision on changing the key direct and indirect tax rates is taken at the level of the finance minister and the PM. Officials in the ministry have argued that should the economic condition deteriorate, the government can always reduce the duty.

Budget 2012: Will the FM think long-term for a change?

India is a long-term growth story. It has a vibrant democracy, young population and the enterprise to grow. At least this is the view portrayed about India for investors whether local or foreign to encourage them to invest in the India growth story.

The Indian government, however, is definitely not in for the long term. The government believes that a series of short term steps to boost the economy and improve financial market sentiments will translate into the India long-term growth story being kept alive.

It is time for long-term steps without worrying about the short-term repercussions (which may, in fact, prove positive). The Finance Minister should take long-term steps for the economy in its budget for 2012-13, which will be presented to Parliament on 16 March.

In the past, the government has taken many short-term steps that will harm the economy in the long term. The first is its inability to reduce fuel subsidies. Oil prices have risen six-fold over the past ten years and the government has actually gone back on the dismantling of the APM (administrative pricing mechanism), as it could not muster courage to effect a complete ‘pass through’ of rising oil prices.

The last Finance Minister, P Chidambaram, found an off-balance route to absorb fuel subsidies — issuing oil bonds. That is the shortest-term measure one can get as he simply put the burden of paying back those bills on our children.

The current Finance Minister, Pranab Mukerjee, told the Reserve Bank of India (RBI) to fund the government as it could not raise fuel subsidies. The RBI, in funding the government’s fiscal deficit, has increased its balance sheet by 270 percent over the last three years, threatening to send inflation out of control.

Inflation has been trending at over 9 percent over the last couple of years, much above the low-single digit levels seen in the first half of the past decade. In fact, the RBI has been proudly stating that low inflation in the early 2000s was due to the end of ad-hoc financing it used to provide to the government in the late 1990s and getting the government access the market to fund its deficit.

The farm loan waiver credited to P Chidambaram is another short-term measure that has led to long-term pain. The farm loan waiver caused a hole in the government’s finances of Rs 65,000 crore and it has turned an important sector of the country into a bad lending proposition. Loans are meant to be defaulted is the mantra of farmers as seen by the losses suffered by the micro-finance companies such as SKS Microfinance.

Power, an important sector for the long-term health of the country, is in dire need of reforms. The losses suffered by state distributors of power are affecting production and distribution, causing lenders’ balance sheets to weaken and sending power prices shooting up for consumers.

The reduction of taxes, spending on rural employment and now a food security bill are all short-term measures guaranteed to bring down the country in the long term. A fiscally constrained government cannot reduce taxes, and if it does, it leads to inflation as the RBI funds the government’s deficit.

NREGA has also led to wage rates rising across the agricultural sector leading to rise in food production costs and creating a spiraling inflation effect. The food security bill will lead to a sharp rise in food prices as the government ensures sufficient stock to store in inefficient storage facilities for providing food security.

We all know what the government needs to do for the long term: reduce subsidies, improve agricultural efficiencies and carry out key reforms in important sectors. However, we all know that this will not happen, as short term is more important than long term for the government.

Hopefully, Pranab-da will surprise us this time around.

Tax exemption slab likely to be raised from Rs 1.8 lakh to Rs 3 lakh

NEW DELHI: The tax exemption slab is expected to be increased from the present Rs 1.8 lakh to Rs 3 lakh, in case the proposed recommendation of a Yashwant Sinha-led parliamentary standing committee on finance get cleared in the Union Budget for the year 2012-13.

The draft report of the committee on UPA's ambitious Direct Tax Code (DTC) is likely to suggest several amendments including linking tax slabs to consumer price indexes which allows an automatic rates adjustment.

The committee is likely to propose the tax rates of 10 per cent for the slab of Rs 3 lakh to Rs 10 lakh, 20 per cent for upto Rs 20 lakh and 30 per cent beyond that. If the panel's Rs 5 lakh ceiling recommendation is accepted, the 3 crore assesses will stand to benefit from not filing returns.

The Direct Tax Code (DTC), which is currently being scrutinised by the Parliamentary Standing Committee, has suggested that the income tax exemption limit should be increased to Rs 2 lakh from existing Rs 1.8 lakh.

Budget may increase tax exemption limit to Rs2 lakh

New Delhi: The government is likely to provide some relief to individual income tax payers in the forthcoming Budget by raising the exemption limit to Rs2 lakh, as provided in the Direct Taxes Code (DTC), and hiking the slabs for different tax brackets, reports PTI.

The possibility of lowering the tax rates, however, is remote in view of the fiscal constraints being faced by the government, sources said, adding that the government will take on board some of the key recommendations of the DTC.

DTC, which is currently being scrutinised by the Parliamentary Standing Committee, has suggested that the income tax exemption limit be hiked to Rs2 lakh from Rs1.8 lakh at present.

It also proposes that the highest personal income tax rate of 30% should apply to annual income above Rs10 lakh, as against Rs8 lakh.

Finance minister Pranab Mukherjee will be unveiling the Budget proposals for 2012-13 sometime around mid-March.

The industry, too, is demanding that in view of high inflation, the income tax slab should be increased although the government may retain the existing tax rates.

CII director general Chandrajit Banerjee suggested that basic exemption limit should be increased from Rs1.8 lakh to Rs2.5 lakh for individuals.

“We have suggested that the income in the range of Rs2.5 lakh to Rs6 lakh should be taxed at the rate of 10%, whereas that in the next slab up to Rs10 lakh can be taxed at the rate of 20%. Above Rs10 lakh, it should be taxed at 30%,” Mr Banerjee said.

Ficci secretary general Rajiv Kumar said the government should incentivise people to come into tax bracket.

“Given the revenue constraints, the income tax rates for individuals may not be reduced. It is, however, imperative that the peak rate of 30% for such assesses be made applicable over an income of Rs10 lakh, against Rs8 lakh at present,” Mr Kumar said.

Assocham president Dilip Modi said the Budget should provide basic exemption limit of Rs2 lakh and the tax rate of 10% should apply to persons having income above Rs2 lakh and up to Rs5 lakh.

Calling for raising the tax exemption limit, PHD Chamber secretary general Sushmita Shekhar argued that it is necessary to increase disposable income and boost demand in the economy.

“India is a consumption-led economy. Role of private sector consumption in boosting the overall economic growth is immense,” she said.

Bonanza for salaried class in Budget 2012-13?

New Delhi: Union Budget 2012-13 may bring cheer to the salaried class as the Centre is said to be mulling a restructuring of the income tax slab.

According to reports, Monday, Union Finance minister Pranab Mukherjee may announce a rejig in income tax slabs and also increase the income tax exemption limit from the existing Rs 1.8 lakh to at least Rs 2 lakh.

A newspaper report said that the new tax slabs could be in line with the Direct Taxes Code Bill, which was introduced in Parliament in 2010.

The proposed bill says that incomes between Rs 2-5 lakh be taxed 10 percent, Rs 5-10 lakh be taxed 20 percent and incomes above Rs 10 lakh per annum to be taxed 30 percent.

The present tax structure is that incomes between Rs 1.8 lakh and Rs 5 lakh are taxed 10 percent, those between Rs 5-8 lakh taxed 20 percent while 30 percent tax is slapped on incomes above Rs 8 lakh.

Clearly, the government appears in mood to provide succor to the aam admi as the proposed tax restructuring will lead to an increase in disposable incomes, consumption spending and savings.

Budget 2012-13: Hike in iron ore export duty unlikely

The iron ore industry is unlikely to face a further hike in export duty on their produce in the upcoming Budget, according to the Steel Ministry.

However, this is unlikely to provide much relief to the miners, whose margins are already under pressure due to the latest hike in export duty on this key steel-making ingredient to 30 per cent.

A senior Steel Ministry official said so far, there has been no discussion on raising the duty on iron ore exports and this is not likely to happen in the forthcoming Budget since iron ore miners are already paying 30 per cent duty on overseas shipments.

The government had increased export duty on both lumps and fines to 20 per cent from 15 per cent and 5 per cent, respectively, in the Budget for 2011-12. Subsequently, the rates were increased again toward the end of December last year, when the government raised it to 30 per cent for both varieties of iron ore.

However, the official justified the previous hikes, saying that even after levying duties, the huge margins enjoyed by iron ore miners were too high to bring exports to a standstill.

Meanwhile, the Federation of Indian Mineral Industries, which had written to the Finance Ministry urging the abolition of export duty on iron ore fines and a reduction in duty on lumps to 5 per cent, said Indian mining firms were being shifted into the non-competitive zone on the cost curve in global markets as a result of the repeated hikes.

"Export duty on iron ore fines should be abolished since there is no technology in India to use the low-grades fines and (duty on) lumps should be reduced to 5 per cent since it is against free trade and no steel plant is starved of iron ore," FIMI Secretary General R K Sharma said.

India, the world's third-largest iron ore exporter, shipped 117.3 million tonnes of iron ore overseas in 2009-10 and 70-80 per cent of this was in the form of fines, which do not have many takers among domestic steel-makers.

In 2010-11, iron ore exports from the country fell to 97.64 million tonnes and in the first eight months of the current fiscal, exports dipped by a little over 28 per cent to 40 million tonnes vis-a-vis the same period last fiscal.

The ministry of heavy industry is seeking a Rs 6,000 crore incentive package in the forthcoming Union Budget to boost the manufacturing of electric and hybrid cars and two-wheelers in the country.

"There has been constant demand from the manufacturers of green vehicles for some incentives from the government. So, the ministry has sent a proposal to the finance ministry for a Rs 6,000 crore incentive package under the national council on electric mobility," an official from the ministry of heavy industry told Mail Today.

"The fund will be used for providing infrastructure support and also setting up research and development centres for electric and hybrid vehicles," the official added.

The ministry has also proposed a further customs duty reduction on lithium ion batteries and other imported parts which are used to produce these vehicles. The current level of five per cent duty adds to the cost of manufacturing electric vehicles.

Last year, the ministry of new and renewable energy (MNRE) had announced a subsidy of up to Rs 1 lakh on the ex-factory price of electric and hybrid cars produced in India but this incentive is scheduled to expire by March 2012.

In the 2011-12 Budget, the government had announced that it would set up a National Mission for Hybrid and Electric Vehicles to encourage the manufacturing and selling of eco-friendly vehicles .

The government had also eliminated import fees on hybrid parts coming into the country, while proposing to cut excise duty on the development and manufacturing of hybrid vehicle kits to five per cent from 10 per cent earlier.

"However, with many more auto companies expressing their interest in manufacturing electric and hybrid vehicles, the government is looking at more duty cuts and other incentives to encourage them," the government official added.

At present only Mahindra Reva is manufacturing electric cars in India. Despite the growth potential most of the auto manufacturers had stayed away from the Indian market as they feel that there is no infrastructure support in terms of charging stations.

Moreover, the Indian consumers are very price sensitive and no one is ready to pay a premium price for clean technology. However, with the cost of petrol shooting up and with no clear government policy over the current subsidy on diesel, many automakers, including Maruti Suzuki, Mahindra and Mahindra, Hero Honda, TVS Motors and some commercial vehicle manufacturers have expressed interest in producing such vehicle if the government offers incentives to support them.

The government had earlier cut the excise duty on conversion kits that make internal combustion engine cars into hybrids, from 10 per cent to five per cent.

The government had in November 2010 announced incentives for electric vehicle manufacturers of up to 20 per cent on the ex-factory prices of the vehicles subject to a maximum ceiling.

The cap on the incentives was Rs 4,000 for low-speed electric two wheelers, Rs 5,000 for high speed electric two-wheelers, Rs 60,000 for seven-seater three-wheelers and Rs 1 lakh for electric cars. However, the incentive was considered too small to lure the automakers.

Companies like Honda Siel and TVS Scooters have launched their electric and hybrid vehicles but received poor response from customers as the prices were much higher than the petrol variants of these vehicles.

Companies for no change in tax rates in 2012-13 Budget

New Delhi: Reeling under the impact of global slowdown and a high interest rate regime, India Inc on Monday demanded that tax rates be retained at existing levels even as finance minister Pranab Mukherjee expressed concerns about challenges facing the economy.

In their customary pre-Budget meeting with Mukherjee, industry leaders also demanded that healthcare services be kept outside service tax ambit, and privatise coal mines.

“There are various challenges before us, including keeping inflation and fiscal and revenue deficit to manageable levels... which we all have to address collectively,” Mukherjee said in his address to the industry leaders.

At the meeting, business leaders suggested that service tax base may be widened with a negative list, besides exempting infrastructure companies and SEZ units from MAT.

“We have made a case for retaining tax rates at the present level. There should be no increase in corporate tax, service tax and excise,” Ficci president R V Kanoria said in the Budget expectation.

Mukherjee is likely to unveil the Budget proposals for 2012-13 mid-March in Lok Sabha.

He also made a case for privatisation of coal mines, stimulating demand through fiscal measures and revisiting the concept of dividend distribution tax (DDT).

CII National Committee on Healthcare chairman Naresh Trehan sought infrastructure status for the healthcare sector as that would encourage companies in setting up hospitals in smallers cities and towns.

Besides finance and commerce ministry officials, the meeting was attended by ITC Ltd chairman Y C Deveshwar, HUL MD and CEO Nitin Paranjpe, Suzlon Energy founder Tulsi Tanti and representatives of industry chambers.

The industry leaders also sought infrastructure status for aviation, telecom and education sectors, and continuation of interest rate subvention scheme for exporters till 31 March, 2013.

In order to improve healthcare, the industry suggested that a benefit of tax deduction of Rs. 10,000 be given to citizens for preventive health check-up.

Industry representatives were in favour of a reduction in interest rates by 50 basis points to stimulate investment sentiment and stimulate demand.

They also demanded that exports be included in priority sector lending by banks and duty on readymade garments be either reduced or withdrawn.

Company bosses also sought clarity on the timeline for introduction of Goods and Services Tax (GST), besides rationalisation of MAT — a levy that was introduced to bring zero-tax paying companies into the net. At present, companies pay MAT at 18.5%.

They also suggested implementation of the Direct Taxes Code (DTC) in its entirety to help arrest cases of tax evasion.

FIEO president M Rafeeq Ahmed said, “Interest rate for the MSME sector should be capped at seven per cent and others at nine per cent and subvention should be provided to all sectors of exports at least till March 2013.”

FIEO also sought complete exemption of excise duty on handmade carpets, reduction of excise duty on man-made fibres to four per cent (from current 10 per cent), and exemption of service tax on currency conversion for exports.

NEW DELHI: Iron ore producers may get incentives in the next Budget for adding value to the mineral, a move aimed at encouraging its conservation for domestic use.

"The government may announce incentives for the iron ore miners to encourage more value-addition and pelletisation. The Steel Ministry has already sent a proposal to the Finance Ministry in this regard," a source said.

The government in the Budget for the current fiscal had raised the export duty on iron ore, both fines and lumps, to 20 per cent from five per cent and 15 per cent, respectively and fully-exempted exports of iron ore pellets from any duty.

Justifying the hike in duty, Finance Minister Pranab Mukherjee had said, "This (iron ore) is a natural resource which needs to be conserved," and added that exemption of any duty on pellets is "to encourage the value addition process for fines".

Pellets are produced in globules form from very fine iron ore and mostly used for the production of sponge iron. However they are also used in blast furnaces in some countries.

Sources said the government is considering providing tax- holidays to miners to encourage setting up pellet capacities. They, however, he did not go into the specifics.

Though India is the one of the top exporters of iron ore in the world, its pellet making capacity is nothing significant. Against the world's 388 million tonnes of pellet production in 2010, India's contribution was just 18 million tonnes.

The government's initiative has paid off as iron ore exports fell by nearly 30 per cent during the April-November period to just 40 million tonnes from 51 million tonnes during a year ago.

Meanwhile, the government further increased export duty on iron ore to 30 per cent towards the end of 2011.

Sources said around 25 million tonne pellet capacity is in the pipeline in the country and if government provides further incentives to the miners, more capacity would certainly come.

courtesy: eximguru