The Union Budget 2010 - The Highlights
The Union Budget presented by the Finance Minister in Parliament yesterday was in the backdrop of a severe recession plaguing all parts globe and back home the twin pressures of containing inflation and yawning fiscal deficit was the immediate task of the Finance Minister. And a close study of the various proposals of the Union Budget would reveal that he may not have performed too badly.
The Union Budget and Fiscal Deficit
The yawning gap in government expenditure and revenue resulting in unsustainable fiscal deficit has been taken care of by the Finance Minister in the Union Budget. He has done the most sensible thing by laying down a road-map towards its progressive reduction from 5.5% of GDP by 2010-2011 to 4.1% by 2012-2013. Which is a positive step and should be welcomed. After all no country can afford to live beyond its means without injuring the long-term economic interests. The needs for prudent fiscal management have forced him to partially rollback concessionary rate of excise announced few months back.
The Union Budget and Soical sector Spending
The Prime Minister has so often laid emphasis on inclusive growth and the Finance Minister's proposal to spend big in social sector is in step with the declared intent of the government. The Union Budget proposes to net Rs 25;000 crore through disinvestment which is earmarked for social sector development.
The Union Budget and Direct Taxes
The proposals contained in the Union Budget regarding Income Tax are nothing but attempts at rationalization of slabs. But the popular expectation of a rise in the basic exemption limit of Rs.2 lakh was not met. Similarly the corporate houses were somewhat disappointed with the rise of 3% in Minimum Alternate Tax.
The Union Budget and Various Sectors
Housing
There is an estimated shortage of 22.4 million dwelling units and the organized sector accounts for just 25% of the total housing investments. For the housing sector the proposals of the Union Budget would have impact like the rise in the excise rate from 8.24 to 10.3%. The service tax would be applicable for construction of complex for prospective buyers. Definition of renting of immovable services has been amended with retrospective effect and special services provided by a builder to buyers have been brought under the scope of service tax.
Power
The Finance Minister has exempted in the Union Budget import of electrical energy from payment of Customs Duty. Similar exemption from payment of Excise Duty has been extended on rotor blades for win operated electricity generators. He has also proposed to provide concessional import duty for setting up solar power generating project.
Automobiles
The Finance Minister has proposed to fully exempt from Basic Customs Duty and Special Additional Duty on batteries including batteries chargers and electric motors imported for manufacturing of electrical vehicles. He has proposed to hike Excise Duty on large cars and Multi-Utility Vehicle and Sports Utility Vehicle from 20 to 22%. Excise Duty on electric and battery operated vehicles raised to 4%..
Oil and Gas
Basic Customs Duty on crude oils has been proposed to be fixed at 5%. Earlier the rate was nil. Basic Customs Duty on petrol and diesel has been raised from 2.5% to 7.5% and other refined products from 5% to 7%. The Finance Minister has proposed to impose service tax on construction activity in continental shelf and exclusive economic zone.
Information Technology
The Finance Minister has proposed to allow adjustment of advance Fringe benefit Tax for the Financial Year 2009-2010 with advance corporate tax for 2009-2010. The rules for taxations of perquisites have been notified and the process for service tax refund too has been clarified. He has also proposed to exempt service tax on packaged and canned software for single use and hardware meant for external use has been proposed to be chargeable to Excise Duty at the rate 4%.
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