`Proposal to hike service tax will see growth in collection'
Mangalore, March 7
"It is a budget for the common man" was the expression of experts at an analysis of `Budget 2006-07', organised by
The Hindu Business Line Clubat St Aloysius College in Mangalore on Tuesday.
Welcoming the Budget proposals for the banking sector, Mr B.R. Bhat, General Manager of Corporation Bank, said the move to exempt fixed deposits up to Rs 1 lakh for a five-year period from the tax net under Section 80C of the Income Tax Act may give some incremental growth in deposits. Banks will take more steps to make deposits more attractive.
The proposal to increase service tax from 10 per cent to 12 per cent will lead to 20 per cent growth in service tax collection, he said.
On the move to include the maintenance and operations of ATMs under the service tax net, he said, "Whether the banks will transfer the tax burden on the customers or not depends on the competition in the industry."
Referring to the Security Transaction Tax, he said market capitalisation is going up with large transactions in securities market. There are chances that people may divert their investments into the securities market. In such a situation, there might be substantial benefit from STT this year.
On the continuation of Banking Cash Transaction Tax (BCTT), he said that it is not a cumbersome process to collect this tax, as it was thought in the initial stages of its implementation in the last fiscal. The Union Finance Minister, Mr P. Chidambaram, has done a good balancing act in presenting the Union Budget 2006-07, where there are no additional taxes. But the tax base has been widened, he added.
Service tax hike opposed
Welcoming most of the initiatives of the Government, Mr A. Srinivasa Rao, President of the Kanara Chamber of Commerce and Industry (KCCI), differed with some of the proposals. Opposing the move to increase service tax from 10 per cent to 12 per cent, he said the Government has taken steps to widen the tax base by including some more services in the tax net. In such a situation, The Government should not have proposed to increase service tax rate.
Turning to BCTT, Mr Rao said the chamber of commerce and industry is opposed to it. In the Mangalore region, there are many cashew processing industries and hotels employing a large number of people. The managements of these institutions have to withdraw cash in bulk while paying salaries to their employees. In such a situation, tax on cash withdrawal will affect the managements. "Though we hoped that the Finance Minister would withdraw the tax this year, he did not do so," he said.
Mr Rao welcomed the move to integrate the offices of Income Tax and Central Excise in the country. With this, the people can file their tax from anywhere in the country.
A family budget
By reducing prices for small cars, aerated drinks, ice cream,
dosamixes, the Minister has shown his concern for the family. At the same time, the smokers in the family have been given a message to give up smoking with an increase in cigarette prices, he said.
Dr P.G. Aquinas, Dean of Aloysius Institute of Business Administration, welcomed the gathering. Nearly 200 students from various management schools in Mangalore took part in the budget analysis.