FM to kick off pre-Budget exercise in April

NEW DELHI: The Lok Sabha polls notwithstanding, finance minister Jaswant Singh has decided to initiate a pre-budget exercise from mid-April. The revenue department, and more specifically, the Central Board for Excise and Customs (CBEC), has been asked to assess the sectoral impact of indirect tax concessions announced in January this year as well as in the previous year’s budget, said senior officials.
The FM is scheduled to meet with the CBEC on April 15. Based on the review, the CBEC is also set to propose possible changes in tax laws and further simplify procedures and rules.
The Central Board of Direct Taxes (CBDT) is also likely to undertake a similar exercise. It is reckoned that this ground-work will help the new government when it formulates the ’05 budget.
The impact assessment is significant for indirect taxes as the government extended customs duty concessions for the IT and power, health and aviation sectors ahead of the vote-on-account. It had also slashed peak customs duty across the board for non-agricultural sector, from 25% to 20% and scrapped the 4% special additional customs duty (SAD).
The revenue loss was estimated at Rs 9,000-10,000 crore for the full year. This was followed later by duty cuts in steel to help user industry.
Apart from the duty sops, several sectoral excise concessions were given in the ’04 budget — the most important being the reduction in excise duty on cars, tyres, aerated softdrinks, polyester filament yarn and air-conditioners from 32% to 24%. The 8% cut in duties, coupled with a shortfall in petro-product revenues had forced the government to scale down the original excise budget target by around Rs 4,400 crore.
In the next few weeks, the CBEC will assess whether there is a case for a further cut in excise duties, given that industry in general and carmakers in particular have pitched for an easier duty regime. The government will also have to take a view on further rationalisation of the existing duty structure in both customs and excise, besides the changes in service tax rates.
In the case of direct taxes, Mr Singh has promised to enhance the standard deduction for the salaried class if the BJP-led government is voted back to power. The other concessions which have been assured include extending the exemption on capital gains tax on long-term listed equities for another three years, extending the dividend distribution tax exemption for equity-oriented MFs, including UTI AMC, for one more year and giving fiscal benefits to new projects in the power sector till ’12.
Fresh tax revenue projections will have to be made, since the estimates in the vote-on-account did not factor in any changes in the rate structure. The government’s tax revenues in ’03-04 were buoyant, thanks to the surge in corporate collections. The buoyancy will have to be sustained as the government is committed to wiping out the revenue deficit by March 31, ’08 in the Fiscal Responsibility and Budget Management Act (FRBM Act).