UNION BUDGET 2012-2013

Dipu Thomas joy

Vision 2020

Vision 2020 for building a strong India

How far we are?

What’s in store for this year?

Personal income tax slabs5000 Rupees exemptionInfrastructureSubsidyChildren and EducationRural DevelopmentEmployment and Skill Development

Overview of Indian economy

Growth rate of GDP for 2011-2012 is 6.9%Expected 7.3% growth rate in 2012-2013Industrial sector growth 4.5%Inflation rate 6.55%Developments in India's external trade in the first half of

current year have been encouraging. Diversification in export and import market achieved.

ANALYSIS OF UNION BUDGET 2012-13

CHAPTER 3

Corporate tax rate across years

Gdp & annual growth rate

Index of industrial production

Impact of budget on business

direct tax Govt. will have a new direct tax code. Govt. revenues set to go up. Offshore transactions to come under tax net. A amendment is proposed for IT Act w.e.f. 1962. Share premium in excess of fair market value will

be treated as income.

Impact…(conti..)

Indirect tax Raised the service tax rate as well as the no. of

items under it. GST will replace all indirect taxes.Post GST,• No restriction on movement of goods.• Tax incidence will drop as there wont be any tax on

tax.• Compliance & tax administration will be simple.• Customs duties will disappear from 10% to 0.

Conti…

Healthcare industry again kept out of the tax net. Extra duties are imposed on packaged foods.

Infrastructure

Financing made easier for power, aviation, roads and low cost housing with tax cut for foreign borrowings. Cess on domestic crude oil increased 80% to Rs

4500 per tonne from 2500 per tonne. Proposed withdrawel of 5% customs duty on LNG

& coal will reduce energy costs. Power firms will get cheaper fund, easier funding

and tax benefits.

Conti…

Airlines are allowed foreign borrowings of up to $1 billion. Air India will get Rs 4000 crore as equity infusion.

Fiscal consolidation plan

The fiscal consolidation plan is largely revenue driven.

Gross tax revenue will rise to 10.6% of GDP in 2012-13 from 10.1 in current fiscal.

New Ind. Taxes will net the Govt. 45940 crores but it will lose 4500 crores on direct taxes.

Overall expenditure will rise 13.1% but the revenue expenditure will grow only 10.7%.

Subsidies to decline from 2.42% of GDP in 2011-12 to 1.87% in 2012-13.

Conti..

The expected fiscal deficit as % of GDP in the next year is 5.1 against 5.9 in current year.

The plan may go wrong if, a- non tax revenues fall short again b- crude price rally could derail subsidies c- growth doesn’t recover as envisaged.

Changes in economy

access to cheap foreign debt for Indian companies will boost investor spirit.

The hike in excise duties and low budgeted subsidies for oil will cause an increase in the prices.

Opening up of debt market to foreign investors and the expected higher FDI inflows will strengthen the Rupee.

Govt’s focus on sectors like power, mining, farming, railways and aviation may fuel growth.

For the consumer

The proposal to increase the excise duty and service tax from the current 10% to 12% will

increase the prices of goods and services. Low cost homes will be cheaper. The increase in service tax will cause an increase

of Rs 70-100 per aviation ticket. Six life saving drugs, LCD and LED panels will be

cheaper.