If the Economic Survey of India presented customarily day before the Budget was any indicator of measures to come, there havent been any unpleasant surprises. As a convention, the survey lays down a set of recommendations for Parliament and its up to the law makers to pick and choose. The tax-GDP ratio stood at 10% as per survey and the FM stressed on a higher ratio by increased tax buoyancy and mobilisation, thereby, leading to increased tax revenue. Though the FM admitted that the tax collection target laid by his predecessor was ambitious, I wonder why he didnt scale it down unless the thought behind it is to end the year marginally ahead of the fiscal deficit target.
Focusing on fiscal prudence, he reiterated that cutting on expenditure was not feasible in the view of needs of the growth economy of India. Hence, no major tax sops have been announced for large taxpayers and the tax rates have remained same.
Playing safe, the retrospective amendments made in 2012 have been kept, letting the ball in the courts to take them to their logical conclusion by deciding on their constitutional validity. The only relief being that all pending cases affected by these amendments would be examined by a high level committee of CBDT before taking any action.
Transfer pricing, which has been a highly-litigious area, has seen some welcome changes. Faster disposal of advance pricing mechanism with an option of rollback for four years is in line with the global practices. Allowing multiple year data for comparability and recognition of quartile ranges endorsed by OECD TP guidelines 2010 would hopefully lay to rest the controversy on these long debated issues. The advanced rulings option has now been extended to residents as well and more benches of advance ruling authority may enable taxpayers to obtain a ruling before undertaking the transaction.
What may, however, be imperative for the AAR is to ensure judicial discipline so that rulings coming from coordinate benches are consistent. Tax pass through status to infrastructure investment trust and REITs will help encourage private investment in the infrastructure and real estate sector.
For aam admi, the increase in basic exemption limit to R2.5 lakh and section 80C limit to R1.5 lakh coupled with token changes in excise duty reduction puts some more disposable cash in his hands while encouraging individual domestic savings.
Hopefully, the FMs next steps would be to implement some key suggestions of in-depth TARC report through a series of administrative and legislative changes.