EY views on Interim Budget 2014
Our Leaders on the Interim Budget 2014
"The Finance Minister has laid out an interesting Report card of Government's track record and a rightful claim of successfully containing fiscal and current account deficits and exchange rate stability.Some contentious assertions,though,on the growth trajectory being relatively better,moderation in inflation and "unblocking of hundreds of projects". Finally, a refreshingly bipartisan appeal to commit to fiscal discipline,subsidy rationalization and passing of DTC and GST in 2014-15.Whilst the ruling party and the opposition continue their debate in the election season on the Government's report card,the last mentioned bipartisan appeal needs to be seriously heeded to by one and all for the sake of India's economic health."
"Though the Vote on Account provided a limited window to the Finance Minister vis a vis indirect taxes, the Finance Minister has tried to address the issue of the slump in the manufacturing sector which is a welcome move.
He has provided a huge fillip to manufacturing with across the board cuts in excise duties ranging from 4% to 6% on automobiles - across cars, motorcycles, SUV’s and commercial vehicles. The cuts across the board was more than what was expected, and will provide the much needed impetus to this sector and its component manufacturers who have experienced continued slow down and negative growth over the last year.
Also an across the board cut in excise duty from 12% to 10% on goods under Chapter 84 & 85 will result in some impetus to manufacturing across engineering sector, capital goods and consumer electronics sectors. There haven’t been any significant service tax changes and the Finance Minister in spite of speculation has resisted any across the board rate changes in service tax considering the fiscal stress and slowing indirect tax collections in this year."
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"The rationalization of duty structure of Central Excise duty on the mobile phones may marginally benefit the domestic manufacturers as they have an option to clear the mobile phones on payment of 1% Central Excise duty while the importers will continue to pay CVD at 6%. However, a cost benefit analysis may be required to see if the taxes and duties suffered on the inputs and input services make this a beneficial trade off or the companies may chose to pay excise duty at 6% with Cenvat credit as they were doing before the budget."
EY on Interim Budget - Know what's in store, until we hear more!
Interim budget: A look at the last decade of direct tax
The exceptional growth spurred by globalization of the Indian economy and the subsequent economic crisis have defined the last decade in the realm of direct taxes in India, says Jayesh Sanghvi, our Partner & National Leader - International Tax Services. Read more on his insights.
Interim budget: Hits and misses for indirect taxes
Over the past decade, indirect taxes have played an increasingly important role in the economic growth and revenues of India, reveals our Indirect Tax Services Partner, Bipin Sapra. Read more on his observations.
Direct taxes and GST - The unfulfilled promises
The government now ends its mandate with reaffirmation in the vote-on-account of the same goals, for which it claims to have a clear line of sight, says Satya Poddar, our Tax Partner. Read more on his views.
A backward-looking Interim Budget
Not unexpectedly, the FY15 Interim Budget was backward looking, replete with unjustified comparisons with selected decade old absolute numbers, motherhood statements about ten desirable features of economic policy, and a signing off statement, says our Chief Policy Advisor Dr. DK Srivastava. Read more on his insights.
Tackling tax avoidance, simplifying compliance sum up last decade
There is no denying that India has come a long way from being a stringent tax system to an equitable slab-rate structure, an effort aimed at widening the tax base and generating more revenue, reveals Mayur Shah, Executive Director, Tax & Regulatory Services. Read more on his observations.
Interim budget 2014: Times guide to direct taxes
The guide to direct taxes compiled and powered by EY.
Times guide to indirect taxes
The guide to indirect taxes compiled and powered by EY.
Vote on account – an interim relief in indirect taxes with a hope to spur manufacturing & growth
Harishanker Subramaniam, Partner & National Leader - Indirect Tax Services, EY
The customary “vote on account” presented by the Finance Minister on February 17, 2014 should have been non- event, but past interim budgets have shown that governments use this window to selectively tweak taxes specially indirect tax rates. This year’s vote on account was no different with clear signals emanating from the Finance Ministry and that changes which can be effected without the need for change of law will be carried out specially in the space of indirect tax rates.
Before I proceed to comment on the indirect proposals it’s important to note the Finance Minister’s comments on the manufacturing sector and I quote “Manufacturing is the Achilles heel of the Indian economy. The deceleration in investment in manufacturing is particularly worrying.” These are facts and the IIP contractions in manufacturing are telling signs of the deep malaise. So there was a dire need to provide the much needed impetus to manufacturing which essentially meant tweaking of the excise rates. Speculation was rife that he may reduce excise duties across board or chose a path to reduce selectively for certain sectors experiencing pain. Automotive is one sector which has experienced slowdown and negative growth the last year and is a significant contributor to manufacturing as a whole. The industry has been pleading for relief but even they would not have expected this huge reduction with across the board interim excise duty cuts ranging from 4% to 6% on cars (of all sizes), SUV’s, motorcycles and commercial vehicles. This is welcome move and would provide the much needed impetus to this sector and manufacturing as a whole in the short to medium term. It remains to be seen how much of this reduction in excise duty rates are passed on to customers by the manufacturers as there have been raw material costs increases in the past with no comparable price escalations.
Another important move was the reduction of excise duty from 12% to 10% on capital goods and consumer durables falling under chapter 84 & 85 of the Excise Tariff. This is expected to create some economic activity and hopefully spur some growth in areas of consumer electronics, home appliances, industrial products etc. The Finance Minister has also tried to encourage domestic manufacturing by removal of CVD exemption on imports of specified road construction machinery, besides restructuring excise duties on mobile handsets to reduce our dependence on imports.
The speculation of a reduction in service tax was a non-starter with very few changes announced, in the backdrop of overall the fiscal stress. Overall this maybe the optimum best the Finance Minister could have delivered at this stage.
The Budget estimates for this Fiscal Year clearly shows slowing trend in indirect taxes collections well below original budget estimates with excise slated to be either negative or flat. Service tax though growing at a healthy double digit is well below original estimate clearly reflecting the slowing economy. The Finance Minister may have been more than successful in achieving both fiscal deficit and current account deficits targets on the face of it. But what’s important to understand is the manner in which these may have been achieved which could be through a combination of deferred investments, rolled over subsidies and windfall of PSU dividends and spectrum auctions. There is every chance of a new political dispensation coming to power post elections in May 2014 and their government will have their work cut out in navigating the country’s financial health for presentation of the full budget in July/ August 2014.
(Views expressed are personal)×
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