In the build-up to Budget 2017, it was widely expected that two themes would direct the narrative of the document - the economic effects of demonetisation and the ongoing state elections. Finance Minister Arun Jaitley has steered clear of providing funds to any particular state. But it would certainly spread the word around that the latest theme of the government “Transform, Energise and Cleanse India”, would be applicable to every state including those going to the polls.
It is also clear that demonetisation has not impacted the narrative of the Budget. The fine print in the Budget documents list more than 90 amendments to the direct and indirect tax laws which are a mix of the good and the bad.
The good: Topping the list of good deeds in Budget 2017 should be the fact that the finance minister seemed to be in a good mood. He sat down during the presentation of the main Budget, smiled a couple of times, used some quotations and even clarified a couple of announcements to the House in Hindi. The intention to clean up political funding is certainly a good measure since he has treated a path that no one has even ventured into before.
Taxpayers in the below Rs 5 lakh bracket have benefited the most due to the halving of their tax rate. Doing away with plan and non-plan expenditure has enabled the aam aadmi to read and understand the Budget documents better. Liquor baron Vijay Mallya had garnered enough attention over the past year to force Jaitley to state that a law is being drafted to confiscate the Indian assets of persons who flee the country. However, on the flip side, this announcement gives the eerie feeling that the finance minister is expecting some more to flee India without paying up their dues!
The bad: Topping the list of the bad part of Budget 2017 is the fact that the finance minister’s good mood did not translate into tax benefits for a large section of individual taxpayers. Taxpayers in the below Rs 5 lakh bracket get a measly Rs 1,041 per month (Rs 12,500 per annum) as tax break. Jaitley would be aware that a vast majority of individual taxpayers would fall in this slot and hence he should have given them much more.
The announcement need not necessarily be a monetary bonanza - it could be something that could assuage the psychological feelings of the taxpayer. A special increase in the deduction for housing loans for a couple of years and a demonetisation deduction for those without housing loans can be good examples. While the intention to cleanse political funding is welcome, the fact that the books of account of political parties are not subject to audit by the Comptroller and Auditor General of India (CAG) takes away a lot of sheen from the announcement.
Over the years, one has got used to the Railway Budget at least to know about introduction of new trains and improved infrastructure in railway stations apart from a concern on far increases. One would have thought that the finance minister would spend more than the three minutes that he did at least to acknowledge what his colleague in the Railway Ministry has done. The finance minister acknowledged that he has focused on expenditure during this Budget and he has stepped up expenditure on a number of critical areas.
Tax revenues
Despite this, he has managed to balance the books and show a reduction in the fiscal deficit which has been projected to be 3.2% of the GDP. It is apparent that the finance minister is banking on buoyancy in tax revenues to offset his spending. One is not sure which way this will go since indirect tax revenue for the second half of the financial year is going to be driven by the GST and the state governments are to be compensated for losses in their tax revenues. In case tax revenues fall short during the year, there is a clear threat of harassment from the taxman and imposition of additional cesses and surcharges.
The ugly: The lack of any big announcement following the demonetisation paid was a surprise. Since November 8, 2016 when the note ban pronouncement was made, the government had been trying to provide relief in bits and pieces to enable the people to recover from the shock. The logic for this seems to be that the sum of these small parts would make up for the whole. However, the reality on the ground is very different. Budget 2017 was an ideal occasion for the government to make a big-bang announcement - the lack of this is a huge disappointment.
One would have thought the Budget would do away with the needless Income Computation and Disclosure Standards (ICDS) which would radically alter the manner of computation of income especially in a few industries. The last thing that corporate taxpayers need right now is a new bunch of accounting standards of which they are already having an overdose.
Sufficient time
The finance minister made a lot of nice statements about the GST but the fact that he did not announce a final date on which GST would be introduced has to be classified as an ugly part of the Budget. Everyone knows that it has to be introduced before September 15, 2017 but an announcement from the head of the GST Council would have ensured that sufficient time is given to trade, industry and just about everyone else to prepare for a new tax regime with many unknowns.
“Transform, Energise and Cleanse” is a cool marketing tagline for a country. It is unfortunate that the provisions in the Budget leave us with two parting thoughts - we are not sure when and where we will start and this would take a lot of time.
(The writer is a tax expert based in Bengaluru)
