A budget from which the common man is virtually unaffected

The Honorable Finance Ministry presented the “interim budget” budget for the year 2014-15, the overall emphasis was given on promoting domestic production. Leaving the Income Tax slabs untouched the rates of excise duty, service tax etc. were slashed, in specific areas to focus on the growth of some particular sectors. Rather than taking a negative approach for promoting manufacturing in India by raising import duties and trying to restrict imports in whichever way possible. This time the finance ministry seems to have taken a positive step to promote domestic production.  However, the two most awaited mega tax reforms, the introduction of a comprehensive Goods and Services Tax (GST) in lieu of multiple indirect taxes and the Direct Tax Code (DTC), have been on the anvil for some time. The Interim Budget 2014 has not spelt out any definitive timeline for introduction of GST and DTC but only requested the political parties to take an initiative to pass the said laws. Even though the Income Tax slabs were untouched, there were many eye catching changes in rate of excise duty for the manufacturing sectors:

• Even though for a short period of time of 4 months till 30.06.2014 reduction the rates of excise tax will give some boost to the Automobile Industry, which is registering continuous negative growth, the rates are as follows:
  • o Small Cars, Motorcycle, Scooters  and Commercial Vehicles - from 12 % to 8%
  • o SUVs -   from 30% to 24%
  • o Large and Mid-segment Cars  – from 27/24% to 24/20%
• To promote domestic production of “all categories” of mobile handsets and reduce the dependency on imports, the excise duties for all categories of mobile handsets is restructured. The rates will be 6% with CENVAT credit or 1% without CENVAT credit.

Service Tax:

• To control the price of the staple food service tax on storage, packing and loading – unloading of Rice is exempt.
• Service provided by blood banks has been exempt from service tax.

Custom Duty:

• Again, to encourage domestic production of soaps and oleo chemicals, the custom duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols is rationalized at 7.5%.
• To promote domestic production of specified road construction machinery, the exemption from CVD on similar imported machinery is withdrawn
• A concessional custom duty 5% on capital goods imported by the Bank Note Paper Mill India Private Limited is provided to encourage domestic production of security paper for printing currency notes.

Apart from, trying to encourage the domestic production another positive agenda brought forward in the Interim Budget was the relief for education loan borrowers, where around 9 lakh students would benefit from: Finance Minister has announced a Moratorium period for all education loans taken-up to 31.3.2009 and outstanding on 31.12.2013. Government will take over the liability for outstanding interest as on 31.12.2013, but the borrower would have to pay interest for the period after 1.1.2014. Nearly 9 lakh students borrowers will benefit to the tune of approximately Rs. 2, 600 crore. This actually was a “balance budget” and very correctly said by the finance minister that the common man will not be adversely affected by the announcements made during the budget. Was it really an “election budget” but termed as an “interim budget” just for simplicity sake? _____________________________________________________________________________________________ Feel free to write to us,at [info@taxmantra.com] or call us at +91 88208208 11.