The finance minister, under pressure to contain fiscal deficit on one hand and need to stimulate growth on other, had fewer options while presenting the Budget.
On indirect tax front, Budget 2013-14 has maintained a status quo on the rates. While customs duty rates were expected to remain same there was an expectation that the service tax and excise rates would go up by 2%. However, by leaving these rates unchanged the FM has brought some relief to the industry. One reason for pegging the excise and service tax rates at 12% could be that it is closer to the proposed central GST rate of 10%.
While refraining from an across the board increase in rate, the FM has sought to adjust the tax rates both upwards and downwards based on specific need. For example, to promote exports of leather items and footwear, the Customs duty on 20 specified machines has been reduced from 7.5% to 5%. Again with a focus to tax the luxury items, import duty on luxury cars and motor bikes has been increased steeply. A new car with CIF value more than $40,000 or with a engine capacity more than 3,000cc for petrol or 2,500cc for diesel would now attract custom duty of 100% as opposed to 75% earlier. Similarly, the Customs duty on motor cycles with an engine capacity of 800cc or more has been increased to 75% from 60%.
On the excise front, as a measure to boost tax revenue, the duty of excise on cigarettes, Cigar, cheroots and other tobacco items has been significantly raised. Similarly, the rate of excise duty on SUVs has been increased to 30%, up from 27% earlier.
Last year?s Budget saw the introduction of negative list regime resulting in a paradigm shift in service taxation. This year?s Budget had few changes in the service tax arena, though one would have expected the FM to address the unresolved issues based on feedback from industry.
On administration of indirect taxes, in addition to some changes in penalty and prosecution provisions, the unprecedented change which has been proposed is the automatic vacation of stay order of the Tribunal after 365 days of passing the order, even where the case remain pending for no fault of assessee. This proposal is difficult to comprehend as even after recognising that the pendency of appeal is not due to the assessee, the Government wants to proceed against the assessee for the same.
On the positive side, the facility of advance ruling under excise and service tax has been extended to ?resident public limited companies? and to new lines of business. Budget 2013 has also introduced the Voluntary Compliance Encouragement Scheme (VCES) to allow the service tax defaulters to do a voluntary compliance by paying only taxes with waiver of interest and penalties.
Lastly, there was an expectation that the Finance Minister in his Budget speech would lay down a clear road map on the implementation of the long awaited Goods and services tax (GST) in India. Though the FM by setting apart specific amount for CST compensation in the Budget has shown his seriousness, the fact that neither the target date for implementation of GST nor the road map has been announced, indicates that GST is still far way.
Overall this year?s Budget in so far as it relates to indirect taxes is a status quo Budget.
The author is executive director, Indirect Tax Practice, PwC India