'Hidden' burdens in Central budget

The Central Budget might have offered a "softner" by increasing the basic exemption by Rs 50,000 for individual Income-Tax payers, but it has some hidden burdens that might have missed the tax payers' notice.

Under indirect tax proposals, an amendment to the services pertaining to educational institutions may burden par0 ents sending their children to schools next year onwards. Under exemptions, 'auxillary educational services' has been deleted and only four categories - transport of students and staff, catering, security and housekeeping and admission related - are exempted now from service tax. As most schools will have digital classroom content and website, they will become liable for tax now. So parents might end up facing this burden.

Accommodation in pilgrim centres, say Tirupathi, may turn expensive. Renting for residential or lodging purposes will become taxable even when it is not for commercial purposes, with the removal of the word 'commercial'. However, the rent threshold is Rs 1,000 and above. So, accommodation in 'dharmashalas' and such other places will come under service tax.

Similarly, exemptions for air-conditioned point-to-point carriages, like buses has also been withdrawn, which means if one engages a contract vehicle for a trip or for a wedding he will end up paying more.

With the pruning of the negative list, service tax is now applicable on the sale of space or time online, on mobile and hoardings, making a big impact on advertising.

Such instances of additional burden were highlighted at an interaction meeting arranged by the Mysore Chamber of Commerce & Industry in association with KPMG in Mysore at the weekend.

Speaking on indirect tax proposals, KPMG Senior Adviser S Srinath wondered how the government would collect service tax from radio taxis and radio cabs, which have been now brought under the tax net, say from about 5,000 taxies operating in Bangalore.

He cautioned the trading community on the big stick that will be used if they do not pay their taxes properly and also on appeals. While mandatory pre-deposit has been introduced in the budget for appeals, interest rate for delayed payment of service tax will go up from 18 per cent to a range of 18 per cent to 30 per cent, based on the period of delay. Similar provisions had also been made in respect of customs duty.

Detailing on direct tax proposals, practicing chartered accountant Ajay Rotti said those who come under TDS must ensure that their TDS is deducted at source as the budget had made provision for disallowance, penalty, interest and even prosecution.

Overall, the speakers said, the 2014 budget had a comprehensive approach with thrust to manufacturing and reducing litigation. It offered no surprises. As the new NDA Government had not reversed the policy of the previous government, this was not a disruptive budget. "We have to watch for the next budget, perhaps it will be a good budget," Srinath concluded.