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Wednesday, Mar 01, 2006


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Industry & Economy - Taxation


If only consumers had lobbyists

S. Murlidharan

Pressure groups and lobbyists are available for business houses. But the poor consumer has none taking up cudgels for him.

The service tax rate is sought to be raised to 12.24 per cent from the existing 10.2 per cent. The service providers have nothing to lose from this and may even empathise with the Finance Minister when he says that this increase became necessary in achieving his ultimate objective of bringing about parity between tax on goods and tax on services.

The ones who stand to lose are the hapless consumers because the buck stops with them. Service providers may not begrudge this impost secure in the knowledge that at the end of the day their customers or, as the case may be, clients are going to pick up the tab. Ditto for the imposition of a 12 per cent excise duty on computers, which were hitherto not liable for excise duty.

Exempt-exempt-tax

The Finance Minister P. Chidambaram, while slapping this duty, seemed to give credit for the brainwave to computer manufacturers who, he said, volunteered to pay this duty in order to become eligible for Cenvat credit on the inputs used by them in manufacturing computers. But it remains to be seen whether the computer manufacturers would be as magnanimous with their customers as they were with the exchequer.

However, in the matter of exempt-exempt-tax (EET), the middle-class has emerged the winner despite orchestrated lobbying by a section of economists to usher in this regime as commended by the Kelkar committee. What they wanted was tax being imposed at the time of maturity on tax-oriented small savings such as the PPF . Mercifully, the FM has not obliged them, perhaps for fear of antagonising the Left.

Whatever the motive, the reprieve is entirely well merited as EET is ahead of its time in a country where tax evasion is widespread.

The Finance Minister should not waste his ammunition on spoiling the party for the honest middle class and instead should train his guns on the hard-to-tax category. Slashing of customs duty to 5 per cent on a slew of life saving drugs, including for the dreaded AIDS and cancer, is welcome.

Textiles & Garments

Textiles and garments are bound to become cheaper what with the excise duty on man-made textiles coming down to 8 per cent from 16 per cent. On the direct taxes front, while standard deduction for the salaried class has not staged a comeback as wistfully wished by them, there are no shocks either.

The abolition of the economic criteria scheme for compulsory filing of income-tax return pursuant to which one living in a house of a specified size, for example, was ordained to file returns no matter that he had no taxable income is bound to be of some relief.

Its abolition incidentally vindicates the contention of those in the know that it had more nuisance value than anything else.

(The writer is a Delhi-based chartered accountant.)

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