Hike in service tax, excise duty to put additional burden on aam aadmi
Moneylife Digital Team 16 March 2012

On one hand the finance minister doled out minor income tax benefits but on the other hand he put additional burden of 20% hike in service tax and excise duty on the common man

The Union Budget for FY2012-13, by and large, remained a non-event. Moneylife brings experts reactions, welcoming and opposing the budget.

The Confederation of All India Traders (CAIT) has criticised the union budget, calling it an inflammatory document. "…will encourage inflation and will wreck the bone of "aam aadmi" of the Country. Surprisingly just immediate before the budget, the reduction of interest on provident fund from 9.5% to 8.25% will crush the salaried class-said. Increase in Service Tax and Excise Duty from 10% to 12% will make everything costly in the Country. The overall impact of increase in Excise and Custom will prove to be inflammatory." 

In the light of the Finance Bill 2012 presented today, the finance minister has proposed a retrospective amendment (with effect from from 1 April, 1962) with a view to expand the scope to neutralize the Supreme Court decision in the case of Vodafone. Sandeep Ladda, Executive Director - Tax & Regulatory Services, PwC India, said, "The Government has sought to amend the Income tax law retrospectively to bring into the tax net Vodafone-Hutchison type of transactions.  This is with a view to override the recent Supreme Court decision.  Such a move by the Government is likely to create a lot of uncertainty for the global investor who is looking at investing into India."
Prithviraj Kothari, managing director, Riddisiddhi Bullions Ltd says that, "Budget 2012 has been a disappointing one. We strongly oppose this budget. It will create a negative impact not only for the bullion and jewellery dealers but also for the common man. We can say that government has levied an extra 2% duty on the common man. Increase in gold prices along with this increase in duty- how will the common man survive? This move will create a slump in the market and result in smuggling and opening up of other illegal channels to get gold in India. The only positive point is the removal of excise duty on silver branded jewellery. But I personally don't think that will really help."

Srini, Hyderabad-based healthcare activist, said that, "Government has completely surrendered the health sector into the hands of private-corporate entities by weakening govt health care and strengthening private health care. It has paid lip service thorough NRHM & NUHM services to common man across the country. This budget looks like depriving common man of their fundamental rights in health care. They have not provided for strengthening the scientific research in health care across the country," says

Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India says that, "The increase in the service tax rate from 10% to 12% will increase the cost of production for developers, who are already reeling under high input costs. It follows that this increased burden will be passed on to end users. Allowing External Commercial Borrowing (ECB) for affordable housing is, without doubt, an excellent move. It will ensure better capital availability for developers of low-cost housing. This sector is typified by low margins, and it becomes attractive only if developers are enabled to produce greater volumes. Better capital availability will help in timely project execution, which will result in higher volumes."

Sunil Duggal, CEO, Dabur India Ltd, says that, "There are some positives in the Budget by way of a 2% cap on subsidies and its progressive reduction over the next few years, greater focus on Infrastructure, promise to curb black money and capital market reforms. It is heartening to see that the government has recognised the importance of infrastructure for future growth and is taking steps to augment infrastructure across the board, be it power, roads or civil aviation. However, the lost opportunities far outweigh the positives. There is no consensus or move forward in permitting Foreign Direct Investment (FDI) in multi-brand Retail and Aviation. This is surely a missed opportunity."

Neeraj Gulati, MD, Assotech Realty said, "By providing external commercial borrowings (ECB) for low cost affordable housing projects, it has helped to lower interest cost for developers. But there are some unfavourable aspects, like no legislation on Real Estate Investment Fund, no implementation of DTC and no talk on real estate regulator, No relaxed norms for repatriation of FDI in real estate to make the market more investment friendly. Last year, a 1% interest rate subsidy was provided for loans towards affordable housing. Realty sector wanted the scope of this subsidy to be amplified and broadened to include a wider price band of budget housing to benefit home buyers, especially in lower income groups. There has been no development on this,"

Pawan Chaudhary, CMD, Venus Remedies Ltd, said, "An additional Rs5,000 deduction for preventive health check up would also help the pharma sector indirectly and will provide headway for a better health culture in the country. A weighted deduction of 150% on capital expenditure to a hospital shall also augur well for the health-care sector."

Sachin Sehgal, director, Ore Team said there would be no radical shift as of now in the market as the budget is being called a 'neutral' budget.  "There is no introduction of any new incentives or subsidies as of now to either iron ore or steel as a package. The only advantage is the customs reduction but on the other hand the service tax and excise duty have been hiked to 12 per cent.  So the gains have been already washed off."

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