Finance minister Arun Jaitley has announced several measures to improve the ease of doing business scenario and reduce tax litigation, along with the steps to help the needy; but, has failed to cleanup the retrospective tax mess completely.
The biggest expectations from finance minister Arun Jaitley in the budget for 2016-17 was to announce tax measures to improve ease of doing business scenario, take steps to tackle the investment needs, including those for the social and the agriculture sector and a roadmap for cutting bad debts of the banks which have spiralled to dangerous proportions.
By sticking to the fiscal deficit targets of 3.9% and 3.5% of GDP for FY16 and FY17 respectively, and simultaneously setting up a committee to review FRBM goals, he has tried to balance the needs of fiscal prudence and having a flexible system to take care of the investment needs as per the revenue and growth scenario.
Beginning from the relaxation in the tax treatment of the capital gains on Start-up investments to the schemes for resolving tax disputes at the first appellate level, there are measures to nip the litigations in the bud.
But, the biggest concern would be the failure of the NDA government to scrap the 2012 retrospective tax amendments.
The creation of a high-level committee under the revenue secretary to look at new retrospective tax cases, and a one-time settlement scheme for the old cases like Vodafone and Cairn, by paying the taxes due, minus the penalty and the interest, is unlikely to be of any major help in cleaning up the retrospective tax mess — this partial relief hardly means anything in terms of solving these cases. However, the positive change now is that there is a statutory window for resolution of these cases by paying the tax due, which a company like Vodafone can avail if it wants to by paying Rs 8,000 cr initial tax demand.
While a number of taxes, including the infra cess on vehicles and also dividend distribution tax (DDT) of 10% above Rs 10 lakh DDT income, have been brought; tax deductions have been provided for areas like pension schemes.
The one-time disclosure scheme for undisclosed domestic money by paying 45% tax, though, is something that can be seen as a measure against the honest taxpayers, a good response to it can bring in some additional revenue.
Another disappointing feature in the Budget is allocation of just Rs 25,000 crore for bank recapitalisation besides the sketchy start of the corporate tax reduction plan.
The underlying message in the Budget seems to be catering to the needs of the rural areas and the poor by hitting the well-off, something that chief economic adviser Arvind Subramanian suggested in the economic survey tabled in Parliament on Friday.
While there are no major tax benefits for the well-off, some reliefs have been provided to the taxpayers below Rs 5 lakh income level and also first-time home buyers, but barring the political promises like doubling farmers’ income over five years, the steps like bringing in a legislation to restrict the government subsidies and entitlements to the targeted beneficiaries by utilising Aadhaar as base, can be the game-changers in curbing leakages.
Overall, the Budget has tried to touch many things, but it has also failed to address several critical concerns related to growth and investments.