The Hindu Business Line : ICAI's views given due weightage

The withdrawal of notification that provided exemption from service tax for services other than accounting, auditing provided by CAs does not appear to be justified. This will make the services provided by a CA costlier.

The Finance Minster has considered certain suggestions given by the ICAI in the pre-Budget memorandum 2006. First, this Budget allows adjustment of MAT credit while calculating the interest liability.

The ICAI stressed the importance of verifying all bank accounts with and without PAN. The Budget has duly recognised the importance of PAN and the Government is now keen on mandatory compliance with PAN provisions. Further, concerning service tax, the Budget proposes a reverse charge mechanism for taxing the services provided from outside India to recipients at home. This concept was also proposed by the ICAI.

The proposed increase in the rate of MAT due to revenue compulsions may not be in the best interest of the corporate sector.

Further, to levy MAT at 10 per cent on long-term capital gains, arising on sale of shares on which STT has been paid, will virtually remove the difference between long-term and short-term capital gains for the corporate sector.

The extension of the availability of deduction under Section 80C to fixed deposits with banks will boost the growth of long-term deposits with banks. The reduction in excise for small cars is a welcome measure and will boost not only the demand for small cars from the medium segment of the population but may also force the big manufacturers to reduce the prices of bigger models. The service tax rate hike from 10 per cent to 12 per cent is bound to affect the common man.

The withdrawal of notification dated October 16, 1998, providing exemption from service tax for services other than accounting, auditing provided by chartered accountants does not appear to be justified as this will make the services provided by a chartered accountant costlier vis-à-vis those of a lawyer.

The notification dated October 16, 1998, exempting such services was issued after much deliberation, and on the principle of equity there appears to be no reason for its withdrawal.

The proposals regarding Fringe Benefits Tax (FBT) are not unexpected. However, the provisions with regard to superannuation fund have been liberalised, by introducing a ceiling of Rs 1 lakh.

(The author is president of ICAI.)

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