By Parsa Venkateshwar Rao Jr
Finance Minister Arun Jaitley’s fourth Budget, apart from describing Goods and Service Tax (GST) and demonetisation as tectonic shifts, is rather a sober statement of fact.
The Budget is strangely, and perhaps not so strangely, is silent about the projected growth rate for 2017-18. In the post-Budget press conference, Jaitley said that domestic economic growth rates depend on the global environment, and that growth rates which were possible between the years of 2003 and 2009, when global growth rates were robust as well, are not possible today. He said maintaining a 7 per cent rate plus growth rate is a challenge.
The second sobering fact is that tax revenues, which stood at Rs 11.34 lakh crores in 2013-14, grew by 9.4 per cent in 2014-15, 17 per cent in 2015-16, and it is expected to remain at 17 per cent in 2016-17. The advance personal income tax has grown by 34.8 per cent in the first three quarters of the current year.
The Minimum Alternate Tax (MAT) will remain because the phasing out of tax exemptions will begin on April 1, 2017, and it will take seven to 10 years for the government to get the benefit of the removal of exemptions. But as a concession, the Finance Minister has extended the credit period of MAT from the existing 10 years to 15 years.
There is no change in the corporate tax rates. The tax rate on medium and small enterprises (MSMEs) with annual turnover up to Rs 50 crore has been reduced to 25 per cent. The revenue loss estimated as a result of this is estimated to be Rs 7,200 crore per annum.
The income-tax rate for those earning between Rs 2.5 lakh and Rs 5 lakh annually has been halved, from 10 per cent to 5 per cent. The tax rebate available to those earning less than Rs 3.5 lakh annually has been reduced to Rs 2.500. With the tax exemption for Rs 1.5 lakh in investment, the tax would be zero for people with income up to Rs 4.5 lakh annually. Those in other tax slabs will get a benefit of Rs 12,500 per person. The tax foregone as a result is calculated to be Rs 15,500 crore.
There is to be a surcharge of 10 per cent on incomes ranging between Rs 50 lakh and Rs 1 crore, and the surcharge of 15 per cent for those earning more Rs 1 crore is to continue. This is estimated to fetch the government Rs 2,700 crore additional revenue.
The total tax foregone or revenue loss is calculated to be Rs 22,200 crore, and after deducting the additional revenue of Rs 2,700 crore, the total revenue loss is left to stand at Rs 20,000 crore.
The finance minister said in his speech, “There is no significant gain or loss in my indirect tax proposals.”
Lead picture: Union Finance Minister Arun Jaitley with Minister of State, Arjun Ram Meghwal and Santosh Gangwar coming out of North Block office on way to Parliament house to present the General Budget for the year 2017-18 in New Delhi. Photo: UNI