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Story so far: Post-Budget, I join a group of CAs to interact with the Finance Minister on the new proposals. It is no mean task to draw up the country's financial statement, but as usual there are views both favourable and adverse towards the Budget.

Episode 86

Budget was what filled my mind last week. Reactions to the FM's proposals are many. "Dear Swati," writes in R. Subramanya Sivam. "I feel the Budget is moderate and not a very good one. I partially agree with the Opposition's view that this Budget is going to be inflationary. Hike in Excise duty on steel is undesirable. Already the industry is suffering due to the steep hike in international prices, and the increase in coal and other raw material prices. This will have its repercussions on almost everything right from buildings, cars, vessels, and so on. Education cess is a tax on tax on tax — that is, tax is on income; surcharge is on tax; cess is on tax + surcharge.

"There is nothing in the Budget to cheer the capital market. It had already witnessed the worst blood bath on May 17, 2004, showing dissatisfaction over the approach of the government towards reforms. Nothing that gives the market a sense of confidence has been announced. In fact, the transaction tax does not give room for any tax planning. Is there a presumption that the players always make only capital gains and not losses? Also, what will happen to long-term capital loss being carried forward?

"Even after repeated submissions to the FM to abolish Section 50C — guideline value based capital gains tax — the provisions are retained. The Budget has not done anything to encourage savings, but for the senior citizen savings scheme and non-alteration of PF interest. There are no measures to improve tax administration, and expedite tax disputes resolution.

"The Budget does not talk about the Golden Quadrilateral Project, the Interlinking of Rivers Project, the Sagar Mala Project, and so on, which would have given a major thrust to the infrastructure of the country. Thus my view is that, PC has used this Budget as an opportunity to fulfil his poll promises and has not acted as an economist. In a country where most of the literates do not vote, we can expect only Budgets of this sort. With a Budget like this achieving double-digit GDP growth and becoming a developed nation by 2020 will only be a distant dream." Not too cheering.

"Dear Swati, the Budget is for the common voter in the village, who steadfastly stood by the party. Now he has been rewarded with the first instalment of the bonanza," writes Thangavelu. "CAs, economists, industrialists and consultants, year after year, want tax relief or exemptions from the Budget . And if there is any deviation from their expectations, they term the Budget as inflationary or directionless. But when two-thirds of the population live in villages and are the real voters, the Budget should largely address them only. We can say that this will lead to second Green Revolution, which is already due.

"We have seen technological improvements in all fields except agriculture. Have you ever come across an industrialist committing suicide because of debts? But you have read about hundreds of farmers doing so because of crop failure leading to heavy debt burden; the self-respecting and sensitive simple village farmer ends his life, in the absence of proper remedies. . If the FM sticks to his turf firmly, with a few adjustments, the economy will improve as he desires, inflation will slow down, and revenue will stay close to the target of 2.5 per cent of GDP." Quite supportive of the FM.

"I would rate the Budget not commensurate to our requirements," notes Kamal Anil Kapadia from Mumbai.

"The accelerated growth and welfare measures are more realistic, but efficiency is the key," writes Karthik Narayan.

"It's difficult to weigh this Budget without actual performance appraisal. It's a mix of good and bad, though sensible." I wonder if you're only adding lot of flab, Karthik? "Except for turnover tax concept, all other things are very good. Our FM is a pathfinder and his Budget has a `human face', strikes more to the common man and is welfare oriented. Life is full of ifs and buts. Therefore, the FM's Budget will deliver if the proposals are implemented effectively and efficiently with the welfare shifting towards the people for whom it is intended."

"Dear Swati, women participation at Institute affairs is bare minimum. I wish one day our Institute will have a woman President," writes M. Radhakrishnan, sympathising with gender justice. "Now coming to the Budget, running a country is not a one-day affair. In every Budget, we hear about development of agriculture, industry, rural areas, backward places, health, poor, and so on. The only thing different is the scriptwriter. The usual result is negative.

"What is that the new cess would achieve which has not been achieved earlier? Everybody knows that much of the money is siphoned off the system. One good thing is the formation of the FRBM 2003. The Budget is definitely inflationary because of rising input cost in the long run, apart from immediate increases in end-product price. Rise in service tax will definitely pinch. It is only industry that gets Cenvat benefit and not the common man, for telephone bills, service bills, and so on.

"As an accountant I understand that government needs money, so it has to be generated some way. But as a common man I am happy to part my money only if the government spends the same responsibly. Are they doing so is everybody's doubt." Good question.

"Dear Swathi, like our FM, let me start with the good news first," writes Lakshmi, a CA Final student. "He has plugged the loopholes in direct taxes by re-introducing gift tax and disabling set-off of business losses against salary income. This acts as a check to prevent tax evasion. TDS procedures are also simplified. Barring these, the current Budget seems to be indifferent for many people. Under the head salaries, if a person earns an incremental income of Rs 1,000 he is made to pay tax of Rs 9,000. It made people ask their employers to cancel increments. I fear that additional investments will not be made in infrastructure bonds this year as the concentration is now on total income.

"Though the FM claims that he wanted to favour the middle class, I wonder why service tax is to be charged for normal banking services. The Budget does not seem to be good for businessmen. I have lots to comment on indirect taxes also: this Budget will increase imports, for instance. Though the time given to the FM was short, he should have concentrated at least in one area. Cess serves a good purpose and deserves no comments. I feel that the FM has to revisit the subject in major areas." Good Lakshmi for the fearless comments.

"Hi Swati," writes Anil Kumar Pillai from Kannur. "No major proposals in the Budget because another is to be presented within seven months from now. It concentrates on agriculture and is a farmers' Budget. What about the implementation modalities? Rich farmer would grow richer and people in urban areas would grow poorer. I am afraid turnover tax would be thought of in other sectors too." Oh, let us not give such ideas.

"Hello Swati, I am a PE II student," writes Madhavan Nampoothiry from Sreevarahom. "I think the FM has just given importance to agriculture and education. He bowled a googly at the salaried class with that one-lakh proposal. All over it was nothing but an extension of Yashwant Sinha's Budget except some minor shuffling in allocation." So simply put!

Well, this is about the previous week's topic: "Hi Swati, I just read your question in my college site," writes Prasanna Venkatesh from NIT, Tiruchi. "I'm an M.Tech student and I feel that the number of engineers we have now is not quite high to meet our demands. Interestingly, the IT field is in need of more engineers. While CAs and doctors have to serve in a place, engineers' scope is not limited; it's spread worldwide and is also not an exhaustible field, so you can go on studying and working. So don't have any fear to make one more future engineer." Positive thinking.

*********

Friday was a disaster day, and I left office after reading about the loss of so many young lives in school. Not that I could do anything, but the news was so overwhelming that I decided to just walk down the market road. There were all those announcements of mega discounts and big sales. My mind was tossing between at least two thoughts: One, what do we do to avoid such mishaps among kids? Two, does it make commercial sense to give such hefty discounts that consumers start worrying about quality? Send in your thoughts on any of these two by Friday.

Swati_CA@hotmail.com

For archived episodes of this column click on: http://www.thehindubusinessline.com/nic/swati/index.htm

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