Perhaps, for the first time in Indian history, we have a situation that the Union Budget is presented and passed by both the houses of the Parliament in less than a month. Not only this, that too in the current financial year itself. Thanks to virtually no debate in the house even on crucial proposals impacting economy and growth of nation and thanks to the democratic country we are. Simply because there are elections in few states in May / June, we had to cut short the economic agenda of Parliament and made budget a not so important event.
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A major event which took place is introduction of a Bill to amend the Constitution of India so that a nationwide tax called goods and service tax (GST) could be introduced. This Bill would enable the Government to levy a two tier GST- Central GST and State GST in near future (could be 2012 or later). It will eliminate multiple tax structure and broaden the tax base. Taxes like central excise, service tax, value added tax, entry tax, octroi etc will all get subsumed into one ax called GST. The only fear states are having is the loss of fiscal autonomy which is misplaced as Union has agreed to make up for the revenue loss, if any.
While getting the Finance Bill 2011 approved, some sigh of relief has been given to taxpayers. Bowing to tremendous pressure from all quarters, the proposed ‘misery tax’ on medical profession has been withdrawn and now there will be no levy of service tax on doctors, clinics and diagnostic centres. However, this, seems to be temporary as in GST regime, these services are likely to be taxed. But yes, for the present, it is a welcome sign. This move is certainly pragmatic and welcome. In fact, it should not levy any tax on sectors such as education, medical health etc. Both these sectors are the primary responsibilities of the Government and there should be all out encouragement to these services in private sector. The rising cost of health care and education makes a strong case for their non taxability even in GST regime.
While there is no relief to the legal profession yet, the base for taxing all the services from cash basis to accrual basis will be deferred by three months. The new point of taxation based on earliest of the three events – rendering of service, raising of invoice or receipt of payment will now applicable from July 1, 2011 instead of 1st April .
Some marginal relief in excise duty and concessions has been provided to sectors such an automobiles, garments, personal computers etc. In case of branded garments, abatement has been increased from 40 percent to 55 percent of the retail sale price which will help small garment manufactures. However, contrary to expectations, 18.5 percent minimum alternate tax (MAT) has been retained on SEZ developers and units which may hamper further entrants in SEZ segment.
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