1. Budget 2018: Why increasing MSP is a huge rural sentiment boost

Budget 2018: Why increasing MSP is a huge rural sentiment boost

Budget 2018:  The biggest positives in this year's Budget were the increased pricing of the farm produce and the health insurance to ten crore families with an insurance cover of Rs 5 lakh.

By: | Published: February 2, 2018 6:26 AM
Budget 2018: If there is one area which is a disappointment, it is the corporate tax not going down. (Reuters)

Budget 2018: If there is one area which is a disappointment, it is the corporate tax not going down. Looking at the number of companies that fall under the Rs 250 crore revenue bracket, it would be about 97-98% of them. However, in terms of the total revenue being taxed, the top 4-5% companies account for a large chunk of the taxes paid. In the current market environment, everything is global and Indian firms compete with companies from all over the world. Around a third of the profits are taken away due to a high level of taxation. This is especially given that shareholders expect a very high return on their equity compared to the Western world. Similarly the interest rates are higher in India. So the cost of doing business remains very high. Apart from this, competing with companies that pay lower taxes in their respective markets, it becomes very difficult for us to remain cost competitive.

Also Watch | Budget 2018: How it affects auto sector, car prices & motorists

Apart from this, the government has pushed all the right buttons with this Budget. There was not much that was left out. The biggest positives in this year’s Budget were the increased pricing of the farm produce and the health insurance to ten crore families with an insurance cover of Rs 5 lakh. Increasing the minimum support price will be a huge rural sentiment boost. However, as a auto manufacturer, it can be said that this would not directly lead to increase in volumes sold, rather it would only mean that buyers would prefer bigger and costlier cars.

Know how Arun Jaitley’s Budget 2018 will impact your tax liability with this Income Tax Calculator

To me, it would be more sensible to take 2-3 years as long-term rather than one year. Now with 10% on long-term and 15% on short-term the difference in duration is very small for anyone to have an incentive to become a long-term investor and therefore it could lead to more short-term buying and selling which is not good for the company because we prefer investors to be invested longer. The fiscal deficit estimates being raised to 3.5% is also not quite surprising. The government should not get tied up to the 3.2% fiscal deficit target as it was needed this year to help in the expansion of expenditure.

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