Union Budget Model by : Chirag Pugaliya Bharat Premjani Nikhil lalwani

(F.Y. B.B.A. - C)

“L.A.D.D.E.R”

L→ LEARN A→ ADOPT D→ DEVELOP D→ DIFFERNTIATE E→ EVOLVE R→REVOLUTIONIZE

Budget Motto:

Growth: 1.With growth stagnating over the past

three years, the economy was thought to be in a precarious position.

2.We have now set growth target of 9%

- 10% over the next three years & to convert Indian Economy from 2 trillion to 20 trillion by 2020.

Objectives:

This segment has been focused majorly because India imports lot of technology and never develops its own.

Investment in R&D particularly in technology will help in control expenditure and also bring in revenues

A 360 degree of development has been focused, i.e., all Industries have been kept in view for overall development.

Also development programme impact reaches ‘ALL’ regions have been pointed, not a specific city/state/region.

Research & Development

  All possible measures to reduce the fiscal deficit have been

considered and implemented. According to data given in Budget 2014.

Fiscal Deficit:

year 2014-15 2015-16* 2016-17*

As % of GDP

4.1% 3.3% 3.0%

Environment Development along with the concern of environment is need of

the hour.

“ Zero defect & Zero effect ”

The revenue is generally gathered by two sources. They are as follows:

Direct Taxes Indirect Taxes

Source of Revenue:

Personal Income Tax:

No revision of tax rates in existing slabs. Instead of increasing tax rates of all existing

slabs, a new slab has been introduced which is for individuals earning 25 lakhs or more, such individuals will have to pay income tax at a rate of 35%.

Direct Taxes:

Income Tax Rate

Up to Rs 250,000 Nil

Rs 250,000 to Rs 500,000 10 %

Rs 500,000 to Rs 10 Lakhs 20%

Rs 10 Lakhs to Rs 25 Lakhs

30%

Rs 25 Lakhs & above 35%

Tax Rates of Developed Countries

Corporate Tax:-

•The education cess to continue at 3 percent.• Surcharge of 10% will be payable, if income is above Rs 1 crore.•In order to encourage “Make in India” program, the new upcoming companies will be given benefits in corporate tax. Such companies will be paying 20% + surcharge+ education cess for the first three years instead of 40 %.

Other Key Points :•Personal income-tax exemption limit for senior citizens• (Above 60 years) increased from Rs 300,000 to Rs 350,000.•The very senior citizens (above 80 years) earning up to 10 lakhs are exempted from taxes whereas those earning above 10 lakhs have to pay 20% tax.• No change in rate of surcharge for corporations and individuals.• Investment limit under section 80C raised to Rs 200,000 from Rs 150,000. •(The investment limit is raised in order to increase the savings rate. More is the investment; more is the flow of money in economic development process.)

Indirect Taxes:

Major types of indirect taxes are as follows: 1.Sales tax 2.Service tax 3.Value added tax (paid to state) 4.Custom duty and octroi (on goods) 5.Excise duty   In 2014, the service tax was 12 %. The effective service tax was 12.3%

(include 0.2% education cess and 0.1 % higher education cess). No change in base rates.

Import duty to be reduced for raw materials such as iron ore and other ores Specific rates of excise increased on cigarettes in the range of 50% to 72%. Excise duty on paan masala increased from 16 to 20%, on unmanufactured

tobacco from 55% to 65% and on gutkha and chewing tobacco from 70% to 80%.

(This hike is intended to discourage the consumption of tobacco and its derivatives because 20% deaths are result of tobacco consumption. Secondly, it will increase the revenue slightly because mixed reaction will be resulted. Most of the people won’t give up consumption of these products.)

Additional excise duty of 5% on aerated waters containing added sugar.

Increase in basic customs duty on imported flat-rolled products of stainless steel from 7.5% to 10%.

(The duty is increased to reduce the import and to increase the demand of products of home nation.)

Reduction in basic customs duty from 5% to 3% on forged steel rings used in the manufacturing of bearings of wind-operated electricity generators.

(Custom duty particularly in this product is decreased to encourage setting up of units which generate energy by renewal sources.)

Other types of taxes:  Professional Tax, Municipal Tax, Entertainment Tax, Stamp

Duty, Registration Fees, Transfer Tax, Education Cess, Surcharge, Gift Tax, Wealth Tax, Toll Tax.

In previous years Wealth tax was 1% on net wealth exceeding Rs 3,000,000.Now it is revised to 2 %.

Tax on movie tickets, DTH services, and other forms of entertainment can be increased.

(Because these are wants of individual not needs. In order to

reduce fiscal deficit some measures to increase the revenue must be initiated such that it doesn’t troubles the needs of common man. In fact entertainment is wants not need. )

 

GST will create a single, unified Indian market to make the economy stronger.

The implementation of GST will lead to the abolition of other taxes such as octroi, Central Sales Tax, State-level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, et cetera, thus avoiding multiple layers of taxation that currently exist in India.

It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.

Goods and service tax (GST)

Planning is going on to implement a dual GST system. Under dual GST, a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of a transaction.

All goods and services, barring a few exceptions, will be brought into the GST base. There will be no distinction between goods and services.

The rate is expected around 15-25 per cent. After the total GST rate is arrived at, the States and the Centre will decide on the CGST and SGST rates.

Currently, services are taxed at 10 per cent and the combined charge indirect taxes on most goods are around 20 per cent.

Almost 140 countries have already implemented the GST. Most of the countries have a unified GST system. Brazil and Canada follow a dual system where GST is levied by both the Union and the State governments.

France was the first country to introduce GST system in 1954.

GST Around the Globe:

Country Rate of GST

Germany 19.6 %

Austrailia 10 %

Japan 5 %

Singapore 7%

Sector Percentage

Manufacturing & I.T 10 %

Infrastructure 15 %

Defence 12 %

Research & Development 10 %

Tourism 9%

Agriculture 10%

Education 10%

Health care 7%

Rural Development 8%

Women Empowerment 4%

Interest 8%

Subsidies 5%

Assistance to States & UTs 12%

Total Expenditure ( Provisional) 1.2 crores

Total Revenue (Expected) 1 crore

Expenditures:

Manufacturing & I.T: To encourage entrepreneurship in manufacturing sector in

India by domestic as well as foreign companies various schemes, policies are needed to be developed.

One result of such efforts is “Make in India” program. Summits, exhibition must be organized by Govt.

IT industry is the leading contributor to economic growth as well as for forex.

After seeing the success of private players such as Infosys, TCS in IT sector, the Government must either startup a PSU or nationalize existing small companies and develop them. Remaining fund i.e. five lakhs to be used for it.

Infrastructure: Funds are to be distributed to revive old, closed oil, gas

wells; to accelerate exploration of coal bed methane reserves; to set up new airports in Tier-I, II cities via PPP, AAI; for metro rail projects for Lucknow, Ahmedabad, etc.

Environmental development is also essential. Fund to be spent for Ganga river transport plan. 

Provision in the Budget to fill up strategic reserves for crude taking advantage of the falling global oil prices. India, the world's No.4 crude consumer, is building storage facilities at three locations in the south of the country to hold a total 36.87 million barrels of oil, enough to cover about 13 days of its needs in case of a supply disruption.

Research & Development: R&D is required in agriculture, bio-technology, etc. Skill development centres to be developed in Bihar,

Uttar Pradesh, North Eastern states to impart training to labour to transform them into skilled labour.

Tourism Industry: Tourism Industry of India has great potential. It

contributed to 6% of GDP in the year 2013. In December alone, the country saw a 421.6% jump in tourist arrivals compared to the same period in 2013.

Funds are to be used for developing E-Visa Facility, Visa on arrival facility, etc.

Restoration programs for historical monuments. 

Agriculture:  National common farm market must be developed to removes

intermediaries ensuring greater profit margins for farmers. Inventories, cold storage, irrigation channels must be developed. Funds to be allocated for Kisan Tv channel,  NABARD long-term

rural credit fund, etc Loan scheme at least possible interest rates to be provided to

farmers.

Education: Instead of establishing new IITs, IIMs, AIIMs; focus must be laid

on ensuring the standards of existing colleges. When it comes to colleges people rush for Govt. Colleges; what

about when we talk about schools? Govt. Schools must be developed. Poor children must be encouraged for gaining education by organising free mid day meals, entertainment shows, etc.

Health Care: New equipments to be introduced in existing Govt. Hospital. At least 1 Govt. Hospital to be established in each taluka by

2020.

Rural Development & Women Empowerment: Rural development is essential to decrease the

migration of individuals towards cities. It will result in reduction of unemployment, it will

attract companies to setup its units in rural areas. Funds to be utilised in schemes such as ‘Nirbhaya’,

‘Self Help Groups’, etc.

Interest & Subsidies: fund is allocated for paying the interest on loans taken by

the nation from W.B; IMF; etc. Essential to follow policy of reducing subsidy spends & aim

to make food subsidy better directed.

Assistance to states & U.T.s: Fund are  to be allocated to improve power availability in

Delhi, Uttar Pradesh, provisions for Jammu & Kashmir for flood, fund to states for other contingencies such as drought, famine, scarcity of water, etc.

 Biotech clusters to be set up in Bangalore, Faridabad.  To set up world class convention centre in Goa via PPP.  Funds to build up rail connectivity in Northeast.   

Ways to reduce fiscal deficit:1.Increasing Revenues: Increase tax rates on personal income, corporate tax. Increase the service tax & sales tax rates or increase

the goods and services range on which it is applicable.

2. Devaluation of currency: Exports become cheaper, more competitive to foreign

buyers. Therefore, this provides a boost for domestic demand.

Travel to India gets cheaper; local industry may benefit. A depreciation of the domestic currency results in higher

import costs for the country. Failure of a similar rise being experienced in the prices of exportable commodities is going to result in a widening of current account deficit (CAD) of the country.

3. Direct Investment Schemes: Government should initiate schemes like PPF Scheme inviting

people to invest directly with Government for long term or by investing in individual projects. People should be given special tax benefits on such investment.

4.Increase Import duty on Gold: India is the world's biggest importer of gold and the

precious metal is the biggest contributor to the import bill after crude oil. The import duty on gold can be increased in order to reduce the import and demand of the gold.

NOTE: But this will eventually lead to empty the inventories of sellers of India. This will increase the smuggling of gold across loose borders of nation.

5.NRI Investment Scheme: Government should form policies such that it could demand

investment from NRIs. Because Government can’t tax their income directly but they have also utilized the nation’s resource at one or the other point to reach their present position.

However the rate of investment can be kept low and special benefits should be made available to such individuals in order to satisfy both the side i.e. individual as well as Government.Income Rate

Up to 75,000$ Nil

75,000$ to 250,000$ 1.5%

250,000$ and above 2.5%

6.Mobilize the Gold: In India investing in gold has become a trend. People

consider it safer to invest in gold rather than Share Market or anything else. This resulted in accumulation & blockage of gold in economy. If the gold keeps on flowing in market as well as economy there will be no need of such high imports.

GOLD DEPOSIT SCHEME: The trusts and individuals holding surplus amount of gold can deposit it with PSU banks and earn interest over it.

Buy back scheme: The trust and individual can sell their respective gold to government in exchange of Government bonds, lands, etc along with tax benefits such as concession in wealth tax.

7.Promoting FDI & PPP & B.O.T: By promoting Foreign Direct Investment & public

private partnership the flow of funds in economy can be increased, simultaneously it will reduce the burden over Government of investment in the project.

B.O.T:B.O.T stands for Built, operate & Transfer.The projects can be given to individual companies

on the basis of agreement under which companies built and operates the project for a time period according to contract. After the time period gets over the ownership transfers to Govt. again.

8.Disinvestment: Disinvestment can also be defined as the action of an organisation (or

government) selling or liquidating an asset or subsidiary. It is one of the best available option to reduce the fiscal deficit. Presently, the Government has about Rs. 2 lakh crore locked up in PSUs. The government can sell its small stake such as 5-10% in its blue chip companies such as SAIL or COAL INDIA, etc or the PSU operating in high potential market or sector such as AIR INDIA.

9. Taxation Reform: GST ( Business friendly tax regime) . To fund programs like “Swachh Bharat Abhiyaan” a new “environment cess”

or “Citizen Tax” can be introduced.

10.Increase Import DutyIt will lead to decrease in import thus reduce balance of payments and it will

boost demand of domestic product also.

11.Increase custom Duty