Pranab’s budget 2011-12
NEW DELHI: On Monday Finance Minister Pranab Mukherjee waved no magic wand for the telecommunications sector, leaving it disappointed.
Rajan Mathews, director general, Cellular Operators Association of India said, “We in the cellular industry are deeply disappointed that the industry that has provided so much to national development and has made India the second largest and fastest growing telecom market in the world, has not received the encouragement and nurture befitting such an important engine of economic development and nation building.”
S.C. Khanna, general secretary, Association of Unified Telecom Service Providers of India, said that though village broadband has been taken into consideration there has been no tax benefit for the sector.
The industry was expecting an exemption of service tax on broadband besides the announcement of auction of additional spectrum in the financial year 2011-12, and accordingly include the proceeds from auction of additional spectrum in the budgetary estimates.
With over 750 million subscribers, increasing on an average of 17 to 18 million subscribers per month, the Indian telecom sector is one of the fastest growing in the world
Let’s have an overall look on budget
Food stuff: Readymade food material like sugar confectionery, pastry and cakes, starches, paper and articles of paper, textile goods, drugs and medicinal equipment will become costlier with increase in the concessional rate of excise duty from four per cent to five per cent.
Ready made garments and branded textile made ups will also become costlier with the levy of mandatory 10 per cent excise duty. Exemptions from excise duty is being withdrawn on micro processor for computers, floppy and hard disc drive, CD—Rom drive, DVD drives and writers making it costlier but they will attract only five per cent concessional duty.
Gold and silver: Precious metals including gold and silver will become cheaper also sanitary napkins, baby and clinical diapers and adult diapers with reduction of excise duty and factory built ambulances. However, one per cent excise duty is being imposed on branded jewellery and branded articles of precious metals.
The Budget for next year pegs the fiscal deficit at 4.6 per cent of GDP for 2011—12 which works out to Rs 4,12,817 crore. Gross tax receipts are estimated at Rs 9,32,440 crore, an increase of 24.9 per cent over the Budget Estimates for 2010—11.
Net non—tax revenue receipts for the next financial year are estimated Rs 1,25,435 crore. The total expenditure proposed for 2011—12 is Rs 12,57,729 crore. Plan expenditure will be Rs 4,41,547 crore, an increase of 18 per cent and non—Plan expenditure will be Rs 8,16,182 crore, an increase of 10.9 per cent over Budget estimates of 2010—11.
Defence: Defence expenditure for the next year has been pegged at Rs 1,64,415, an increase of Rs 17,071 crore over the last financial year. This includes a capital expenditure of Rs 69,199 crore.
“Needless to say, any further requirement for the country’s defence would be met,” Mukherjee said.
The Budget has raised allocation for social sector spending by 17 per cent to Rs 1,60,887 crore and the allocation for Bharat Nirman programme by Rs 10,000 crore.
Allocation for infrastructure has been increased by over 23 per cent to Rs 2,14,000 crore and the credit to farmers hiked by Rs 1 lakh crore to Rs 4,75,000 crore.
The Budget assumes open market borrowing of Rs 3.43 lakh crore. Extension of nutrient—based subsidy to cover urea is under active consideration.
In a boost to housing sector finance, the Budget continued the scheme of interest subvention of one per cent on housing loans and liberalised it by extending it up to Rs 25 lakh from the present Rs 10 and Rs 15 respectively.
GST: The Finance Minister also proposed various measures to achieve a closer fit between the present Service Tax regime and its successor Goods and Services Tax (GST).
The Minister announced a broad set of financial sector reforms, saying he proposed to move the legislations relating to insurance laws, LIC, revised pension fund bill, banking laws amendment bill, State Bank of India Subsidiaries Bill and a bill on Factoring and Assignment of Receivables.
Kerosene, LPG: In an effort to curb diversion of subsidised items like kerosene, LPG and fertilisers, the Budget proposes to introduce from March next year a scheme that will move towards direct transfer of cash subsidy to people living below poverty line (BPL).
On the much—speculated roll—back of stimulus measures implemented three years ago in the midst of global financial crisis, Mr. Mukherjee said a counter—cyclical fiscal policy is required for insurance against external shocks and localised domestic factors.
Aiming towards fiscal consolidation, the government proposes to introduce an amendment to Fiscal Responsibility and Budget Management Act, laying down the fiscal roadmap for the next five years.
The Finance Minister also proposed to introduce the Public Debt Management Agency of India Bill in Parliament in the next year.
FDI: In a bid to make the Foreign Direct Investment policy more user—friendly, Mr. Mukherjee said discussions are underway to further liberalise the policy.
To liberalise the portfolio investment route, it has been decided to permit SEBI registered mutual funds to accept subscriptions from foreign investors for equity schemes which will enable Indian mutual funds to have direct access to foreign investors.
To enhance the flow of funds to the infrastructure sector, the FII limit for investment in corporate bonds, with residual maturity of over five years issued by companies in infrastructure is being raised by an additional limit of USD 20 billion taking the limit to USD 25 billion.
This will raise the total limit for FIIs investment to corporate bonds to USD 40 billion.
Service tax: The budget sought to widen the ambit of the service tax net by which hotel accommodation above Rs 1,000 a day and AC restaurants that serve liquor will be included.
The scope of life insurance service is being widened to cover all services provided to any person by an insurer and legal services provided by business entity to individuals and individuals to entities but not individuals to individuals.
Opposition parties flayed the budget saying it was very “disappointing and direction less” while the industry welcomed it as “positive and growth oriented“.
Hailing the “commendable job” done by his Finance Minister, Prime Minister Manmohan Singh said the signals are that this is a government which is reform oriented but admitted “you cannot please all people“.
Diagnostic services: All services including diagnostic services provided by AC clinical establishments with more than 25 beds and services provided by a doctor who owns such establishments have been brought under the service tax net.
Economy class domestic travel by air will cost Rs 50 more while international travel will cost Rs 250 more. Higher class domestic travel by air attract a standard 10 per cent service tax bringing it on par with international higher class travel.
While direct tax changes are expected to result in a revenue loss of Rs 11,500 crore, the net revenue gain on account of indirect taxes is likely to be Rs 11,300 crore, including an additional Rs 4,000 crore on account of service tax changes.
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