There is a conscious effort of Finance Minister Arun Jaitley to take the states on board as he prepares to ring in Goods and Services Tax by next year.
In fact, he has made a masterly move in this direction in the Budget, according to Srinath S, partner, KPMG in India.
In a presentation made at a session of Budget analysis here, he said that the main grouse of the states had been that they had not been adequately compensated for their loss in CST.
“In 2013-14, the Budget offered ₹9,300 crore as reimbursement. Only ₹1940 crore was handed over. Revised estimates 2014-15 show that ₹10,758 crore was disbursed or allotted to states and ₹242 crore for union territories.
“In the 2015-16 Budget, ₹15,000 crore has been set aside. This is a good move by Jaitley in his bid to earn the confidence of the states through the transition to GST.
Srinath lauded the efforts to promote Make in India campaign. Some of the duties have been knocked off.
MAKE IN INDIA
“There is no customs duty, no CVD or SAD on any items imported for manufacture of IT products in India. If you read along this with the excise notification the real impact can be seen.”
In the case of tablet computers, a leverage of more than 10.5 per cent is to be had between a product manufactured in India and that imported from outside.
This is huge and that is what is going to make manufacturing in India more attractive, Srinath said.
“We all know that India in the next two or three years will not be in a position to build capabilities required to manufacture major items. So the aim is to bring components here and help with manufacturing.”
The leverage is even more with mobile phones. Customs duty has been hiked, forcing some manufactures to talk of hiking prices.
TAX ON AGGREGATORS
There is an unmistakeable expression of intent against getting too much into litigation. Pay tax and the penalty and move on – this seems to be the overarching theme here.
On service tax, he said that the new impost on aggregators is ‘funny enough.’ For instance, in the radio taxi business, the aggregators say they don’t own cars. By the same token, what happens to a Mastercard or Visa? They too provide the same type of service here.
The message going out is that if the aggregators are not based in India, their agent will pay tax here. If there’s no agent, they will have to identify a person for the same in India. “This is an issue that bears watching as we go forward,” Srinath said.