Wednesday, March 02, 2016
Introduction of new cesses in addition to those introduced in the previous year appear regressive
Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP.
Budget announcements seem well directed with focus on rural economy, infrastructure spending, social welfare schemes and 'digital' initiatives. Rationalization of indirect tax and duty structures for various sectors such as IT hardware, defence, mineral and petrochemical, aviation to name a few, with a view to encouraging Make in India initiative is a welcome move. Overall, coverage of various sectors of the economy was comprehensive with focus on keeping the Government spending within acceptable limits of fiscal prudence.

On the taxation front, the focus on dispute resolution through creation of new tribunal benches, alternative settlement schemes and commitment to refrain from retrospective taxation going forward was encouraging and progressive. However, their efficacy would need to be evaluated based on the fine print of the associated regulations. While no firm commitment on Goods and Services Tax (GST) timelines was made, the industry expectation was to align existing central indirect tax regime with the proposed GST framework. Withdrawal of miscellaneous cesses and rationalization of CENVAT credit mechanism appear to be small steps in this direction. However, introduction of new cesses in addition to those introduced in the previous year, run contrary to that expectation and appears regressive.

On the whole, there is an estimated net increase in tax revenue by almost Rs. 20,000 crores. The sectors contributing to the incremental taxes and resultant impact on the economy as a whole will be keenly watched.

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