The government is likely to announce some changes in excise and service taxes in the interim budget to be presented in parliament Feb 17, a couple of months before the general elections, Finance Minister P Chidambaram said on Monday.
Addressing a press conference here ahead of the beginning of the parliament session, Chidambaram, however, said the government would tinker only with taxes that are essential to revive the economic growth.
"We cannot propose amendments to the Income Tax Act, Customs Act or the Excise Act. But any proposal short of amending a law can be made," the finance minister said.
Chidambaram said the government would also outline vision for the future in the vote-on-account.
According to the finance minister, an interim budget for the financial year 2014-15 will be presented in the Lok Sabha Feb 17.
The main budget for the fiscal will be presented by the new government that will come into power after the general election due by May.
The interim budget, or vote-on-account will be presented during the second part of winter session beginning from Feb 5.
Here's the industry reaction to the interim budget:
Tax firm Khaitan & Co's Executive Director Nihal Kothari said: "The minister has announced reduction in excise duty in the case of three sectors facing deceleration in manufacturing growth. The above change will give some temporary relief to selected sectors.
Ketan Dalal, joint tax leader at PwC India, said the interim budget the duty cuts will hopefully have some effect on boosting these segments, particularly automobiles, which is reeling under one of the worst slowdowns in the recent memory.
Naresh Takkar of Icra said the targeted reduction in excise duty to support the languishing sectors is welcome, although the extent of revival may be inhibited by the short time-frame and sluggish economic activity, as well as weak sentiments.
Deloitte India Senior Director Kumar Kandaswamy said the duty cut will particularly make the borderline customers make a decision in favour of a car or to look for a higher segment. Clearly, this will have an impact up to a point, he added.
On duty cut on SUVs, he said: "The fact that the rate cut applies to SUVs is significant.... SUVs have been given the benefit possibly because of the fact that diesel will eventually get sold at market prices and the additional burden that was imposed on the SUVs in the recent past is sought to be removed."
Arun Singh of Dun & Bradstreet India said the excise duty cut will help to bring some cheer to the sectors, although for the interim period. PTI BEN GK NS
"The Vote on Account is, of course, a temporary intervention but I am glad that problems relating to the manufacturing sector have got some attention with steps taken to stimulate demand for automobiles and capital goods. It is also heartening that the fiscal deficit and burgeoning current account deficit have been reigned in to some extent. A lot more needs to be done to bring the economy firmly back on the growth path but that will be the preserve of the new government and a full budget" says Subhrakant Panda MD- Indian Metals & Ferro Alloys.
"As always, the interim budget focus has been to sustain growth and bring about stability of the economy by way of addressing fiscal deficit and inflation. The budget does well in aiding consumption, having lowered excise duties on some key segments like capital goods, consumer durables and mobile phones. It also positively impacts the domestic manufacturing ecosystem with the announcement around locally manufactured cellphones," Sunil Lalvani, Managing Director, BlackBerry India.
"Mobile technology has changed the way we communicate and interact with each other and even the world aroundus. In a growing mobile market like India, where the telecom sector contributes nearly 3% to the GDP, any positive amendment to the tax structure to reduce costs can consequently spur growth and bridge the growing urban-rural divide", Lalvani further added.
Thugs of economics will be visible on MSM in Prime Time debating #budget2014 presented by corrupt UPA led by Congress as EXPERTS
— Gujarati #HDL (@DabangGujarati) February 17, 2014
4.1% deficit target hinges on over-stated revenue & under-stated subsidy assumption. Plan expenditure budgeted at same level #Budget2014
— Amar Ambani (@AmarAmbani) February 17, 2014
How will it go down to 4.1 % remains to be seen especially,when the spends on populists measures deferred to next fiscal #budget2014
— Kiran Mazumdar Shaw (@kiranshaw) February 17, 2014
Disgraceful behaviour inside Parliament yet again. Imagine what foreign investors and analysts must be thinking. #budget2014
— Vikram Chandra (@vikramchandra) February 17, 2014
The economy good news as per FM: fiscal deficit down, CAD down, inflation moderated and growth picking up. #Budget2014
— Vikram Chandra (@vikramchandra) February 17, 2014
SUVs will be cheaper. In one stroke, UPA has solved India's economic problems. #VoteOnAccount
— Abhijit Majumder (@abhijitmajumder) February 17, 2014
dna take: Overall, the interim budget has avoided populist tendency in order to build a strong economic direction for the future. But, it was better than previous budgets. Allocations for community radio and North Eastern communities are good. Also, education loans and home loans will go cheap which will help the middle-class. Taxing the wealthy as followed by other countries is a good idea.
But, the budget does not tackle important questions like containing Current account deficits at all. Also, the comparisons are drawn with NDA government and its performance (decade old). This is not a proper yardstick to measure the success of any budget.
Also, many felt that the budget was just propogating the views of UPA before elections and thereby advertising the party.
UPA needs to understand that such populist measures are being criticised by people. Will voters be enticed or have they realised the pre-election buzz strategy is yet to be known. Only Lok Sabha polls will say now.
With inputs from PTI