Taxation

In the Interim Budget 2009-10 the 09 is expected to increase

as against FY 08
government had given us just a glimpse
of the changes that it intends to bring • Tax to GDP ratio increased
to 12.50% in
about. No changes in tax rates have been
2007-08 as compared to
proposed in the budget. But according 9.2% in 2003-04
to the Former Finance Minister P.
Chidambaram tax changes are possible.
Clarifying the government’s stance the
present finance minister
Pranab Mukherjee said that taxes
can’t be imposed without parliament’s
mandate. Clearly the budget had not met
the expectations that it had created.
Since in
2004-05 the BJP led coalition government
had brought about changes in factory
gate duties so similar changes were
probably not brought about in this budget.

Vote on account: Statement of

accounts showing the revenues and
expenditures for four months starting
April will be presentedbefore
the parliament to seek its
approval. The full budget for
2009-10 will be presented by the new
government following the national polls
which are due by mid May.

ANNOUNCEME
NTS:

• Tax collections revised to 6.27

lakh crores from 6.87 lakh crores
i.e. down by 8.8%.This shortfall
was primarily due to
the government’s
measures to counter the impact of
global slowdown on the Indian
economy. However the tax
collection in FY
• Tax rates must fall in times of slowdown have also been reduced by
but ability to pay taxes must rise. rationalization of personal
• Rationalized taxes (Excise Duty and tax rates,
Service tax) to ease the shift to the expansion of threshold level to
GST regime w.e.f. April 2010 including ensure expansion of tax base and
the introduction of State level VAT in providing relief to tax payer at the
2005. same time.

• Custom duties have been steadily • For the fiscal year 2009-10, at the
existing
reduced to promote competition and
tax rates Gross tax revenue receipts
efficiency in the manufacturing sector and
are estimated to be 6.71 lakh
remove bias against export sector.
crores and Centre’s net tax
• Structural changes such as
revenue at 5 lakh crore.
modernization and computerization in tax
• Decisions on announcing extending
governance, reporting, return
CENVAT
submission, refunds scrutiny, etc have st
cuts will be announced on 31
been brought about to ensure faster March 2009
collections. Distortions in tax structure

12
Taxation
IMPAC
T:

The budget is a tactical one. Though it

aims at reducing the fiscal deficit to 5.5%
of GDP from the current 6% of the GDP it
does not indicate the exact roadmap to
achieve such a target. If we analyze it a
little further we can observe that
given the economic slowdown, the
personal savings and corporate savings
will shrink further. If this target is to be
achieved it would put tremendous burden
on the monetary policy of the
government. There is not much scope for
the government to reduce tax rates
because the budget deficit is very high
and taxes are a major source of
government revenue.

It was highly expected that the

government will reduce indirect taxes to
help in the transformation to GST regime
.But since this was not met it is expected
that the government will improve the
mechanism to provide relief in terms of
faster tax refunds, ease of filling etc