Centre, state govts should work in sync for growth

The Budget this year is a progressive one and is expected to bring in 'all-inclusive' growth. It has focussed on social sector, physical infrastructure and controlling inflation.

However, the challenge lies in monitoring and implementing the schemes. For this, it is essential that the Centre and state governments work in close coordination .

Although no incentives have been provided for NRIs, we are happy to see that the recommendations of IndusInd International Federation on investment in social and physical infrastructure, monitoring and implementation, rationalisation of indirect taxes, reduction in personal taxation, trading in carbon credits, activating the corporate bond market have been accepted in one form or the other.

The author is chairman, Hinduja Group

http://in.news.yahoo.com/financialexpress/20080303/r_t_fe_bs_budget08/tbs-centre-state-govts-should-work-in-sy-7435665.html

Tax on IT services Union Budget 08-09

The IT/ITES sector has been among the key contributors to India's exponential economic growth over the last decade. And the sector had been getting due focus from direct as well as indirect tax perspective in the form of various concessions.

The recent past, however, has seen IT/ITES companies facing a number of challenges such as depreciation in the US Dollar, fears of a US recession and increased manpower costs. Thus, the industry was looking up to the Union Budget to get certain long pending demands fulfilled.

Though the biggest expectation concerning the extension of the STPI scheme beyond 2009 was left unaddressed, Service tax has been proposed to be levied on all conceivable IT services. IT services were thus far excluded from service tax ambit, on account of which software services exporters were unable to utilise the mechanism put in place for refund of input service tax, and this cost hitherto undermined their competitiveness in the global market. In the Budget, the Hon'ble finance minister proposed to correct this anomaly with the introduction of a new service category, called 'Information Technology Software services', as well as with amendment in certain other existing categories. Thus, upon implementation of the budget proposals, virtually all activities relating to IT software would be covered under Service tax net, thereby making them eligible to refund, subject to fulfilling other export conditions.

Apart from including the excluded services within the levy, another amendment which would prove very significant to the industry relates to changes in the qualification criteria under the Service Tax Export and Import Rules for maintenance, testing and certification services. Software is/would be covered under these categories for certain transactions, and the amendment provides an export benefit or a reverse charge liability depending on the location of the goods, material or immovable property, in relation to which the services are provided, at the time of the service being rendered.

While the above amendments are likely to hugely benefit the exporters of IT services, the impact on importers/domestic users of IT services is yet to be seen. As far as importers/ domestic users of IT services are concerned, the implications of another aspect proposed to be covered under the new levy, namely 'acquisition of right-to-use IT software for commercial exploitation; and acquisition of right-to-use IT software supplied electronically' would be of remarkable relevance.

With this proposal, rights to reproduce, distribute and sell software would become liable to Service tax. Though it remains to be seen whether only customized software would fall in this levy or also packaged software. And, it would be interesting to see the reaction of State VAT authorities on this proposal as they were seeking to levy VAT on transfer of right to use customized software, while packaged software is already liable to VAT. Further, import of right to use software download electrically, which was hitherto not liable to Customs duty may now be liable to Service tax.

Historic conflict of dual levy and applicability of aspect theory are also likely to trigger in again. Implications also need to be examined given the wide coverage of the definition of IT software under Service tax, which includes any data capable of being manipulated by means of any devise or equipment.

Supriya Oberoi Jain, senior manager (Indirect Tax), KPMG India Private Limited

http://in.news.yahoo.com/financialexpress/20080303/r_t_fe_bs_budget08/tbs-tax-on-it-services-bane-or-boon-7435665.html

Current tax slabs to stay: Chidambaram - 2008-09

After giving bonanza to income-tax payers by changing the slabs, Finance Minister P Chidambaram today said the next step should be removal of surcharges if the revenue buoyancy continued.

"Last time anyone has set the tax rates was 1997. This time we have set the tax slabs. I am reasonably confident that these tax slabs are going to stay for long, long time, we have brought moderate taxes and reasonable tax slabs," Chidambaram told TV channels.

The individuals with income of more than Rs 10 lakh and corporates pay surcharge at the rate of 10 per cent and there was a Strong demand from corporate houses to do away with surcharges.

"If revenue buoyancy continues, I am sure the next Finance Minister, which I am sure would be from the Congress party, will begin to remove the surcharges. I think surcharges should go... may be in two steps or four steps," he said.

Chidamabaram had changed the personal income-tax rates to 10, 20 and 30 per cent in 1997-98 Budget, which was touted as "dream budget". Again it was Chidambaram who restructured the tax slabs in his Budget yesterday.

Asked whether general elections were in mind while making this Budget, he said, "every year there are elections in the country, 2006 was an election year, 2007 was an election year and 2008 is an election year. I have presented my fifth Budget...."

According to schedules, elections are in May, 2009.

Budgets don't decide election agenda. Its how you communicate to the people what Budget contains that can help win elections... and what is wrong in that."

http://in.news.yahoo.com/financialexpress/20080301/r_t_fe_bs_budget08/tbs-current-tax-slabs-to-stay-chidambara-7435665.html

Sensex gains 1.32% in the last week

The Union Budget turned out to be a non-event for the stock markets, even as the benchmark Sensex posted a 1.32 per cent gain as the concluding week for derivatives contract sparked shortcovering by investors.

Extremely weak global cues at the weekend, however, left behind a trail of bearish mood for the next week.

A Budget proposal to hike short-term capital gain tax to 15 per cent had a knee-jerk reaction on the market but overall proposals were hailed by the industry captains, expressing confidence that the market will stabilise in the next few days if global factors are encouraging.

The Railway Budget has created favourable conditions for the market as it provided across-the-board concessions in fares and freight rates with a thrust on modernization of rail infrastructure.

Analysts showed more concerns over negative global factors as the bourses continued to be influenced by developments in world markets, especially the US as any recession in the world's largest economy will affect other emerging economies.

Finance Minister P Chidambaram has announced tax sops to industries such as two-wheeler and small car, pharma, infrastructure, hospitals, hotel, consumer product and capital goods in the budget.

In volatile trade throughout, the Bombay Stock Exchange 30-share index moved widely in a range of 18,137.28 and 17,137.99 before ending the week at 17,578.72, a net rise of 229.65 points from last weekend's close of 17,349.07.

http://in.news.yahoo.com/financialexpress/20080301/r_t_fe_bs_budget08/tbs-sensex-gains-1-32-in-the-last-week-7435665.html

Tata undecided about reducing Nano price - Union Budget 2008-09

Mumbai, March 1 (IANS) Following the reduction in excise duties in the union budget, automobile major Tata Motors has slashed the prices of its Indica and SUV models. However, the company Saturday said it was undecided about lowering the price of its forthcoming model Nano, already considered the world's cheapest car at Rs.100,000 ($2,500).

'It's too early' to say whether this would have a bearing on the prices of the proposed family car, Tata Nano, expected to hit the market at Rs.100,000, a company spokesperson told IANS.

According to present indications, Nano will be available in the showrooms in the second half of this year.

Among existing models, the prices of the popular Tata Indica car series have been slashed between Rs.8,500-Rs.14,600.

In the commercial light motor vehicle segment where the company has more than 150 models, including Tata Sumo and Safari, the prices have been reduced by two percent across all models.

'We want to pass on the benefits of the excise duty relief to our consumers,' the spokesperson said.

Another auto major Maruti Suzuki has also announced price reductions following the tax cuts.

http://in.news.yahoo.com/indiaabroad/20080301/r_t_ians_bs_budget08/tbs-tata-undecided-about-reducing-nano-p-6276fdc.html

Indian Union Tax Budget 2008-09

Tax for Men
Upto Rs. 1,50,000/- Nil
Rs. 1,50,001/- to Rs. 3,00,000/- 10 per cent
Rs. 3,00,001/- to Rs. 5,00,000 20 per cent
Above Rs. 5,00,000/- 30 per cent

Tax for Women
Upto Rs. 1,80,000/- Nil
Rs. 1,80,001/- to Rs. 3,00,000/- 10 per cent
Rs. 3,00,001/- to Rs. 5,00,000 20 per cent
Above Rs. 5,00,000/- 30 per cent

Tax for resident individual of 65 years or above
Upto Rs. 2,25,000/- Nil
Rs. 2,25,001/- to Rs. 3,00,000/- 10 per cent
Rs. 3,00,001/- to Rs. 5,00,000 20 per cent
Above Rs. 5,00,000/- 30 per cent

Corporate Tax - Unchanged
Service Tax - No change in service tax rate

Direct Tax
Short-term capital gains tax hiked to 15%
Securities Transactions Tax unchanged
Banking Transaction Tax withdrawn
Central Sales Tax up from 2% to 5%
Bank cash transaction tax to be exempted

Affected items after the Union Budget 2008-09

Expensive

Non filter cigarettes
Unbranded petrol and diesel

Cheaper

Anti-AIDS drugs
Two wheelers
Small cars
Bulk drugs
Crude sulphur
Buses, Chassis
Water Puriifier
Refrigeration Components
Paper and its products
Naptha
Pharma goods