No tax sops for you

External Affairs Minister Pranab Mukherjee on Monday (February 16) presented the Interim Budget for 2009-10. However, the common man is disappointed since not much relief is announced.

So, in effect, the tax structure for the common man remains what it was the last year.

The stock markets tanked as Mukherjee's speech continued, especially concerned over no fiscal measures or duty cuts or tax sops being announced.

Of particular concern to the industry and the markets is the rising fiscal deficit and the fact that the nation will have to wait for a full Budget to get any relief.

The following are the details of what Pranab Mukherjee said about the government's tax policy:

Direct Taxes

Over the last five years, widespread reforms have been ushered in the area of direct taxes. The reform strategy comprises the following elements: -

·  Minimizing distortions within the tax structure by expanding the tax base and rationalizing the tax rates.

·  Enabling the tax administration to provide quality taxpayer services and also enhance deterrence levels. Both these objectives reinforce each other and have promoted voluntary compliance.

·  Re-engineering business processes in the Income-tax Department through extensive use of information technology, viz., e-filing of returns; issue of refunds through ECS and refund bankers; selection of returns for scrutiny through computers; e-payment of taxes; establishing a Centralized Processing Centre and an effective taxpayer information system. These measures have substantially enhanced the direct tax revenue productivity from 3.81 per cent of GDP in 2003-04 to an estimated 6.35 per cent of GDP in 2008-09. Further, the share of direct taxes in the Central tax revenues is now significantly higher than the share of indirect taxes resulting in a substantial improvement in the equity of the tax system. Therefore, the reform strategy in the medium term is to consolidate the achievements of the past.

·  Since there is no change in the tax base and rates, the prospects of growth in direct tax collection in the ensuing financial year will remain unchanged vis-a-vis the revised estimate for the financial year 2008-09.

 Service Tax

·  The refund of service tax paid by exporters on various taxable services attributable to export of goods has been further extended to include clearing and forwarding agents services.

·  The upper limit of refund of service tax paid by exporters on foreign commission agent services has been enhanced from 2% of FOB value to 10% of FOB value of export goods.

·  Drawback benefit can now be availed of simultaneously with refund of service tax paid in respect of exports.

·  In order to mitigate the genuine hardships of goods transport agencies, eight specified services which are provided to goods transport agency have also been fully exempted from service tax.

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