The Budget 2017: Hard task

The Budget 2017: Hard task

Much has been written and said on this and the modal rating of the budget is a healthy 7  out of 10. This stems from the fact that the most refreshing feature of the Finance Minister Arun Jaitley statement is the recognition that the salaried class has been paying its taxes as a result of the tax deducted at source provision that enables the taxman to collect taxes most easily.

In fact the FM went on to say that it is salaried tax payers who have been carrying the burden of paying taxes and having to make up for those who have not been paying these taxes. So the reduction of taxes in the tax brackets up to Rs 5 lakh is something to cheer about.

Hard drive
The auto sector has reason to be less than pleased as it was unfairly made the villain of the piece last year when two of its members found their state of the art vehicles banned by the Supreme Court  in the NCR on the specious reasoning of  vehicles above 2,000 cc being more polluting.

Yet in the current budget there was no measure announced by the Government in scrapping old vehicles particularly those using engines compatible only with older grade BS 1, BS2 and BS3 fuel. 

A scrappage scheme would have been most helpful in removing old vehicles from the road and putting in newer vehicles, enhancing tax collections thereby and ensuring that a culture of pollution reduction takes root. Indeed a missed opportunity.

Further more a formal scheme to capture the second hand vehicle trade and bring it within the tax net would have been a healthy precursor to the advent of GST this July.

The income arising out of the transfer of carbon credits is sought to be taxed at 10% of such income. This is not encouraging at all. Rather the Government of India would have done well to incentivise the generation of carbon credit as this will force companies to look for environment friendly ways to generate production. Those who buy carbon credits ought to have been taxed. Infrastructure spend of course has been fixed at Rs 64,000 crore – while this is laudable it remains to be seen whether the government can sustain the spend at the scorching pace of 133 km per day.

While numbers are important in a budget this is one area where implementation is key to evaluating whether the budget direction is successful or not. 

The hard analysis
The auto sector’s growth has always been linked to job creation. With the punitive tax structure on excise in respect of the bigger cars this sector has hardly been incentivised to grow.

The magic of the auto sector is that for every vehicle built the jobs in the service sector grow concomitantly whether it is in simple service jobs for autos or in the allied financial services and certainly in the auto component sector.

Small cars do not necessarily mean lower pollution or lower congestion which is the bane of Indian urban roads. People mover cars such as the 8 seaters equipped with state of the art engines and compatible with modern fuels ought  to have been encouraged with a lower tax structure to provide last mile connectivity and to lessen the scourge of pollution.  

(The author is Vice Chairman, Toyota Kirloskar Motor)

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