Budget 2012 - Pre-1991 Mindset?
WHILE participating in the general discussion on Budget 2012 in the Rajya Sabha yesterday, Leader of the Opposition, Arun Jaitley said,
The General Budget and the Finance Bill, has really dampened the economic sentiment in the country while our economy needed a boost. Even though different Governments were in power, there were a lot in common with regard to the policy direction and that is how this Economy was seen as more positive. It is a Budget prepared with a pre-1991 mindset.
The approach, which has culminated in this Budget, is to tax people wherever we can tax them. You have now decided to tax people for what they spend. You raise the excise duties. The manufacturing cost goes up. Consumers are going to buy what they get cheaper. You make products costlier. There is a negative list, and that is going to create a huge inflationary impact. For an earning person, the entire tax burden, taken directly or indirectly, could be anything between 50-60 per cent to what he earns.
The coverage of service tax goes up. Last year, the FDI had declined. This year, it has marginally increased. These are not helping us to create additional employment because the industries were already there. You have an infrastructural slowdown. You have high interest rates. The cost of capital has gone up, and, therefore, borrowings have become costly. There is a reverse flight of capital. It is this environment, which had to be corrected, and, I regret, this Budget has failed to correct this environment.
Tax certainty is essential for any taxation planning. When investors come in, they must know how much tax they are going to pay if they earn money.
As regards service tax, the Finance Minister has formulated a principle that all services are going to be taxed this time except those, which are on the negative list. Don't look at the Budget only as a revenue-raising exercise. You have brought in all services. The Finance Minister should seriously reconsider it. This will have an inflationary burden. The services, which are otherwise within the domain of the States, are now being taxed by the Centre for service tax. When you are taxing the services of the States, are you going to compensate the States accordingly?
You have amended the Customs Act. In the Customs Act, you have amended Section 104. Custom offences beyond three years have been made non-bailable. There might be a dispute of value addition. There might be a genuine case of evasion. But then the proportionality of the offences and the manner in which the law deals with them - there must be some nexus between the two. You have brought in a disproportionate provision. So, reconsider some of your provisions so that we can really help the economy in moving faster.