UNIONBUDGET 2012Web Extract from THE ECONOMIC TIMES – Ashwin Kumar firstname.lastname@example.org
What it means for investor• Reinvest in Start-ups to Save Tax• Individuals and HUFs can invest their gains from selling residential property in start-ups to save on tax. But these small enterprises will have to use the money to buy plant and machinery. This can pave the way for a new type of entities. At present, such gains have to be parked in certain bonds or reinvested in properties.• Property Deals to Come Under TDS Bracket• A property buyer has to deduct 1% tax if a deal exceeds 50 lakh for urban properties and 20 lakh in other areas. So, for a 1-crore transaction, the seller will receive 99 lakh while 1 lakh tax will be deposited by the buyer.• Cash Purchases of Gold to be Taxed• All cash transactions for buying gold will come under the tax net. Move may discourage hoarding in gold. A seller of bullion or jewellery will collect 1% tax from the buyer if the deal exceeds 2 lakh. Tax has to be paid even if the seller is not a trader or a jeweller.• Gain in STT, Lose in Services• The proposed 20% cut in securities transaction tax (STT) on delivery-based cash trades fell short of expectations. The market had expected a 40-50% reduction across transactions — delivery and non-delivery cash, futures and options. At the new rate, STT will be charged at 0.10%, or 10,000 per 1-crore turnover on both purchase and sale against the existing 0.125%, or 12,500. But the net impact will be insignificant as the service tax that brokers recover from investors will go up to 12% from 10%.
What it means for consumer• All that Glitters is Dearer• Unbranded gold jewellery will attract a 1% ad valorem excise duty, putting it in the same bracket as its branded counterpart. Standard gold and platinum bars will attract a 4% customs duty, double the previous level. Customers will now have to fork out at least 250 more on unbranded jewellery of 10 gm and 550 more on gold bars of 10 gm.• Twin Strikes of Excise and Service Tax• The proposals to tax all services except those on a negative list and to hike service tax and excise duty rate from 10% to 12% will increase prices of a host of goods and services, from soaps to airline tickets. Small cars will be costlier by up to 20,000. A 1.5-tonne, 3-star split AC will be dearer by 1,000.• Not Much for Rural Consumers• Any boost comes from higher farm incomes or welfare payments. Farm credit is to be hiked by 17%, or 1,00,000 crore, but statistics show more loans are not increasing agri productivity. On handouts, the allocation for NREGS, the largest scheme, is down by 17.5% to 33,000 crore. And cash transfers are still at least a year away.
What it means for consumer• Low-cost Homes will be Cheaper• Developers can access cheaper foreign loans and home buyers will get easier funding, thanks to a Credit Guarantee Trust Fund and more money going into the Rural Housing Fund, a scheme set up to provide rural housing refinance.• A tax rebate of 1% on housing loans up to 15 lakh has been extended for another year. Low-cost homes stay out of the service tax net.• Another Battle for Cattle Class• Ailing airlines got sops, but not enough to pass them on to fliers.• A 2% increase in service tax will raise ticket prices by 70 to 100, says Centre for Asia Pacifi c Aviation. The hike will make overheads (advertising, utilities, rents) costlier for airline companies, says KPMG. Excise duty hike will make aviation fuel and domestic spare parts costlier.
Pranab Cracks Down on Tax Evaders, Lens on Gold & Realty• F I N A N C E M I N I S T E R Pranab Mukherjee has imposed tax deduction at source on real estate deals and gold transactions in cash as part of measures to step up the government’s crackdown against black money.• The Union Budget has also made tax returns compulsory for individuals owning assets abroad. Individuals will also have to present records of such assets for up to 16 years if demanded by tax officials. Besides, unaccounted for assets found during a search will attract heavy taxes.• Any transfer of immovable property, except agricultural land, worth over 50 lakh in urban areas and over 20 lakh elsewhere will be subject to 1% TDS. Similarly, a 1% tax on cash transactions of bullion and jewellery worth over 2 lakh will also be deducted at source
What it means for business• Big Boost for Infrastructure• In line with its thrust on the infrastructure sector, the budget waived customs duty on inputs for fertiliser and iron ore plants. Ailing power plants will now be able to import fuel at a cheaper rate with full waiver of customs duty on coal, natural gas and LNG.• Heat on Services Sector• The budget has raised the service tax rate as well as the number of items under it, increasing pressure on the services industry that contributes 57% to the country’s GDP. It proposes a negative list of just 27 types of services that will not attract tax. These include funeral, burial and mortuary agencies, interest on bank deposits, dividend on investments and travel on public transport. This approach signals a move towards GST.• Healthcare Skips Tax Net• Healthcare continues to remain outside the ambit of service tax. The continuation of exemption follows an unsuccessful attempt last year to impose 5% service tax on diagnostic services and AC hospitals with more than 25 beds. Premium railway services and all aviation services have been taxed.• Consumer Goods Lose Sheen• Slowdown-struck consumer goods industry suffers another setback. Duties on packaged food products and durables are set to increase, putting further pressure on the margins of consumer durable companies, which will now have to resort to innovative pricing strategies.
What it means for business• THE HIKE IN EXCISE DUTY AND service tax to 12% from 10% may temper demand in the economy at a time when India Inc is reeling under the pressure of higher interest rates.• All services, barring 27 types that are in the negative list, will now fall within the tax net.• Healthcare, education, public transport by buses and metros, some government services and interest on bank deposits will remain out of the tax ambit.
SERVICE TAX TAKES IT AWAY• By raising the service tax rate to 12% from 10% and applying it on many more services BUT SERVICE TAX TAKES IT AWAY• You will pay 2% higher tax on your mobile bill, hotel stay, under-construction house, and many more services• You will now have to shell out 12% service tax on AC and first-class train travel; film actors also in the net• From just 3 services in 1994-95, the tax is now imposed on several hundreds; revenue up from 400 crore to 95,000 crore