Budget 2018: With the Union Budget 2018 just two days away, Mahesh Nandurkar of CLSA says that Finance MInister Arun Jaitley will have to walk the tightrope between fiscal prudence and political need to pump up the economy ahead of national elections. Earlier, many experts had predicted the budget to be populist in nature, ahead of polls in 2019. Global credit rating agency Moody’s says that the reforms in India may lose steam in 2018 ahead of the Parliamentary elections.
“A busy election schedule will slow reform momentum in some Asia Pacific economies. In Indonesia and India, regional elections are also likely to slow down any reform momentum. Both countries also have parliamentary elections in 2019,” the rating agency said in outlook for sovereign creditworthiness in Asia Pacific in 2018.
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Mahesh Nandurkar says that with the implementation of GST, the government is unlikely to make any major tweaks in indirect taxes. In the upcoming Union Budget 2018, the first after the implementation of GST, while Finance Minister Arun Jaitley may not tinker around much with the different indirect tax heads, as any decision on indirect tax on goods and services is now taken by the GST Council, the budget may still address key issues relating to GST. The key issues which the Budget is likely to focus on includes addressing falling GST revenues, expanding the GST base, address dwindling exports and Lay out plans to simplify GST structure.
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Mahesh Nandurkar observed that potential in capital gains tax remains a key risk. Many top experts say that Finance Minister Arun Jaitley may introduce long term capital gains tax on equities.“Maybe time has come to look at whether the one year period should be increased to two years. This means only after two years you would consider long term,” Uday Kotak, Executive Vice Chairman and MD of Kotak Mahindra Bank, told The Indian Express. Gains from equity holdings for short term (less than a year) are presently taxed at 15 per cent. The gains made from stock market transactions after one year are currently exempt.
A few research houses point out that the move may be seen negatively by the stock market. “The market also hopes that the LTCG on equities is not re-introduced. Tax free LTCG has been a key driver for investments in equities. However, an increase in the time limit for LTCG from 1 year to 3 years looks possible to foster a longer term approach to equities,” Angel Broking said.