The 2016-17 Union Budget seeks to ensure that there is harmony in tax transactions, ease in doing business, and reduction in litigation, said S Kannan, Commissioner of Customs (Appeals), while addressing students of the School of Management, Pondicherry University, as well as other institutions. His address was part of a panel analysing the Budget for the students.

Moderated by D Sampathkumar, former Editor of BusinessLine , the panel also had Prof Amaresh Samantaraya, an Associate Professor of the university, present his views to an audience comprising over 500 students and several faculty members. He said the Budget has a lot of incentives for rural and agri-India, for infrastructure, for Start-up India and for banking. The share of agriculture in the GDP is only one-fifth, but it provides the most jobs. This government has provided a lot for agriculture and it has a road map with a plan to double farm incomes in five years, said Samantaraya.

“This is a must for the economy. If you want to improve the standard of living of a sizeable population, agriculture and the rural economy has to do well.”

The Budget has proposed amendments to the statute by which the assessees can agree to solve the disputes at an early stage and settle it through payment of less penalties and compounding of offences. The Budget has also provided for creation of 11 new Benches of Indirect Tax Tribunals to liquidate old arrears of cases, Kannan added.

Single window clearance

One of the important announcements in the Budget is a single window clearance for customs. Clearing of goods at ports depends on verifications by various agencies, and not just assessment of duties by customs. There are approximately 17 agencies currently working with the Customs department. The Finance Minister has proposed a single window clearance where all agencies come together at the major ports and clear the goods, which would speed up the process. Another unique proposal is of the deferred customs duty payment. If an importer has a good track record, then he can pay customs duty on a deferred basis and use the cash instead for working capital and to run his business temporarily, pointed out Kannan.

Tax proposals, infrastructure, and companies

Referring to indirect taxes, the Commissioner said the tax proposals are subtle but will garner higher revenue. The amount of tax revenue, which will increase, will be much more than what the Finance Minister has modestly projected. He said that around ₹19,000 crore more has been projected as revenue that will be collected than the current year but the real collection will be much higher. He explained about the new cesses that have been imposed and several amendments to Act and Rules that will enhance the service tax collection. He stated that this budget looks at helping and facilitating the genuine and honest tax payer while ensuring that the evaders are taken to task with an overall thrust on dispute resolution.

Prof Samantaraya said the emphasis on road infrastructure will definitely easy perceived capacity constraints. The Budget also envisages that the Companies Act will be amended to promote ease of doing business in the country. The emphasis on start up India will also help in the long term in generating jobs. “This Budget addresses two structural issues that the Indian economy is grappling with: agricultural and rural growth and in creating jobs,” said the professor.

Gold and India

Rajalakshmi Nirmal, Chief Research Analyst at BusinessLine , dwelt on the huge market for gold in the country and the government’s two schemes – the gold monetisation and sovereign gold bonds — which are expected to quell this appetite for gold. Elaborating on the government’s sovereign gold bond schemes, she said all the gains made from appreciation in gold price for investors of these bonds have been tax exempt by the Centre. “An interesting feature of the gold bond is also that there is an interest payment of 2.75 per cent a year which is irrespective of how gold prices move. Moreover, there’s a sovereign guarantee on this bond which makes it a zero risk and an attractive option,” she said, urging students to invest in it once they started earning.

The gold monetisation scheme, which is aimed to make productive use of the 20,000 tonnes of gold with Indian households, is a good way to make the idle gold work she added.

“The gold deposit will earn a nominal interest for you. In this Budget, the Centre has made both; interest received on the deposit and capital gains on the gold in it tax exempt. The one hitch though is that the gold given to the deposit will be melted. Since, the Centre intends to on-lend the gold to jewellers, it can’t do away from melting the gold,” she added.

Tax the rich, spare the poor

R Anand, Partner at EY, who was the concluding speaker, likened his role to that of a finisher batsman in a T20 match, making a tongue-in-cheek analogy that he knew exactly how much time he had to finish his talk. Anand said the Budget had three big themes: One theme is where the Finance Minister clearly says, ‘I will tax rich and spare the poor’.

“The message is that the small and medium class, the salaried class will be spared and the rich will pay more tax. This is the direction the Finance Minister is moving in and nobody has a quarrel with this proposition of transfer of money from a surplus to where it is needed.”

Anand pointed out that the country has 2.5 lakh panchayats , and now the action will happen at the panchayat level as the Budget says each panchayat will receive ₹1 crore.

“Apart form understanding receipts and payments of the Union of India, we have to understand the receipts and payments of panchayats also. We need to have a robust system at the panchayat level also.”

The third message he conveyed is the Government’s intention of increasing the tax payer base.

“In this country we have only 45 million tax payers, which is less than 4 per cent of the population. The Government said that last year, they added 4 million more tax payers, and if we can climb to 100 million tax payers, that will be good. The OECD average is 23 per cent of the population, so if we need to get to that figure it will take a lot of effort. The direct tax paying population has to increase,” said Anand.

RP Raya, Dean of the School of Management, welcoming the panellists and the gathering, said that the youth of the country need to be enlightened, and provided with skills and knowledge.

“That appears to be the endeavour of the Budget though it will take two to three years to take effect,” he said.