Budget for 2018-19 – Tax sops for electric vehicles

When Arun Jaitley presents his fifth consecutive Union Budget tomorrow (February 1), it will put him in an exclusive club of finance ministers who have managed to do so. This is surely good news.

Though the Central Statistics Office (CSO) did not revise the gross domestic product (GDP) growth rate for 2016-17, the higher growth in gross value added (GVA) in 2016-17 at 7.1%-the same as the GDP figure for the year-means the government exhausted robust indirect taxes collections in paying the subsidy bill.

Monetisation of transmission assets, commercial exploitation of surplus land and creation of new avenues for ad revenue are some of the measures being undertaken to maximise earnings. We hope this budget would be sympathetic towards the sector so as to resurrect the affected businesses again. “I would also want the government to come up with steps that could promote the usage of Rupay cards in the country and thus lower the cost of transaction, as Mastercard and Visa are not only costly but also outdated and cause a delay in Digital India to take off”, said Dinesh Agarwal, Founder and CEO, IndiaMART.com. There could also be something for banks and investments.

This will be the last full-fledged budget to be presented by the Narendra Modi-led government, and the first one post the rollout of the GST.

Rationalisation of personal income tax slabs is rather unlikely given the country’s fiscal situation, but that has not stopped industry bodies CII and FICCI from demanding it in their memorandum submitted to the finance ministry.

Over the past couple of years, the significance of the Union Budget has slowly but surely diminished. At an average income tax rate of 30 per cent, bringing the top 4.1 per cent of super-rich farmers into the income tax net in Budget 2018 will help the finance minister to raise Rs 25,000 crore as revenue.

‘We expect the honourable finance minister will announce increased tax rebate limit, so that the consumers may find more disposable income to buy their chosen dream homes.

Modi’s image as the “the slayer of the rich” and “protector of the poor” could further be buttressed if his government decides to tax long-term capital gains tax in the future.

Experts feel that lower tax rates encourage less tax evasion and, therefore, there is merit in the Government encouraging the public to pay their taxes honestly by reducing the tax rates and/or increasing the income tax slabs.

As the government can not excessively depend on bond issuance, Modi is likely to seek higher targets for divesting state-owned assets in the new budget. A recent Oxfam report said the richest one per cent of Indians account for 73 per cent of the total gain in national wealth previous year. Besides, with the Survey warning against the rich parking their funds away from real estate and gold, into the stock markets, this space must be closely watched.

Critical areas will be addressing unemployment and farm distress. The Budget could also be created to address concerns of the common people. More sops for farmers and rural population are on cards. The survey emphasized the importance of an effective, efficient and expeditious contract enforcement regime for economic growth and development. It thus won’t be unreasonable to expect a slew of gender-based incentives in the Budget, like some for employers to hire more women and others for women employees. To ensure parity for the salaried taxpayer, the government may consider re-introducing an inflation-adjusted standard deduction from salary income, which was withdrawn in the 2006 budget.

“In the past few years, The Indian Government has initiated a series of initiatives, directed at driving overall change for the positive in the economy, and results are sure to follow suit”.