Budget Insight Out: India Inc shouldn't judge tax policy on rate alone

Business Standard's panel of experts dissects Budget 2017 to help you read the fine print

Our panel of experts at 'Budget Insight Out' dissect Finance Minister Arun Jaitley's Union Budget 2017 to help you read the fine print and make better sense of the provisions announced for financial year 2017-18.

Excerpts:

Finance secretary Ashok Lavasa on Saturday evening hailed Finance Minister Arun Jaitley's Budget, stating that the government took a considered call to balance spending with fiscal prudence.

"Spending impetus was necessary for rural, agriculture, infrastructure, social sectors. The Budget provides that," said Lavasa, during a panel discussion at Making Sense of Budget 2017, moderated by Business Standard at Metropolitan Hotel in New Delhi.

Lavasa, who is also expenditure secretary, said that people expect the budget to be a big-bang multi-starrer. In fact, it is essentially a broad policy statement.

Supporting the government's digital economy call, Lavasa said that digitisation would bring back transparency and would make people more tax compliant.

Hasmukh Adhia, Revenue Secretary stressed on the government's initiatives to deepen and widen the tax base, while clarifying that the honest taxpayer need not be worried.

He said that the advice the finance ministry received in pre-budget consultations included:

1. Decrease taxes

2. Increase expenditure

3. Maintain fiscal deficit

"The Budget is very conservative in revenue collections. I agree that our direct tax projections for FY18 are conservative. The focus is on more tax compliance and for persons earning around Rs 50,000, there is hardly any tax," Adhia said.

On India's performance in terms of personal income tax to GDP ratio, he said India is one of the worst performing countries. We should accept that India has a major problem with regard to tax compliance.

Companies that have a turnover of Rs 50 crore (or less) in 2015-16 will get the benefit of low corporation tax, Adhia said, while Lavasa added that the government's views towards India Inc should not be seen through the prism of corporation tax alone.

On the issue of rising crude prices, Adhia said the Government may consider rollback of excise duty on petrol products if they rise beyond $60-65.

Calling for tightening the noose around people who misused banking channels to park unaccounted money, Sushil Chandra, Chairman, Central Board of Direct Taxes (CBDT) said the government has asked Reserve Bank of India (RBI) to seize accounts where there is no seeding of PAN and the account is active.

On MSMEs reeling under the pressure of demonetisation, Adhia said that the government will clarify what happens to MSMEs as far as corporation tax is concerned, if they exceed Rs 50 crore annual turnover.

Responding to a question on the source of government's income for defence, health, education and infrastructure, Lavasa said that the money would come from borrowings by NHAI, railways and the private sector.