The Firm

Show Timings:

Friday: 10.30 pm, Saturday: 11.30 am

Sunday: 9:30am & 11.00pm


Budget 2014: Select Wish List For Indirect Taxes

Published on Wed, Jun 18,2014 | 17:35, Updated at Wed, Jun 18 at 17:35Source : 

By: Krupa Venkatesh - Senior Director & Sandhya Sakthivel -Manager, Deloitte Touche Tohmatsu India


In early July, the Finance Minister, Mr. ArunJaitley will present his maiden budget. The changes from an indirect tax perspective that could be expected from this Budget will have a significant role in providing the impetus for growth and development of the economy in the coming years.


Reduction in excise duty from the current 12% to the pre-stimulus 10% remains high on the agenda for   the industry. With escalating costs of raw material and higher interest rates on borrowing, the MSME sector which is the engine for exports and employment is under severe pressure and requires urgent revival measures in the Budget. The basic exemption that was fixed way back at Rs. 1.5 Crores for duty free clearances in a financial year should be raised atleast to Rs. 2.5 Crores.


Specific industries such as pumps, rubber, electronics, paper etc., are facing the anomaly of inverted duty structure. This is detrimental to the domestic manufacturers as imported finished goods turn out to be cheaper on account of reduced Customs duty rates. This unintended situation has been hurting local manufacturers for a long time, and it is time that these problems are addressed.


To incentivize new projects and investment in infrastructure, customs duties on project imports could well be exempted.   Service tax exemption threshold at Rs. 10 lakhs is woefully low, and the cost of collection of service tax from small assessees is higher than the tax collected. Refund of input tax for exporters of services remains a sore point with field formations continuing to drag their feet on refund claims, the outstanding in respect of which on All India basis could be over Rs.3,000 Crores. There is need to devise a suitable system such as rebate mechanism on pre-determined basis for example to deal with the problem on a prospective basis and at the same time provide a simplified route for payment of past arrears on some rational basis.


There is also a need to harmonise and iron out some anomalies in service tax exemptions. There can hardly be any quarrel on the fact that education and healthcare are the priority sectors for any Government. However, the exemptions to the healthcare sector need some attention – a stark example is service tax on rentals. While educational institutions are exempted from payment of service tax on rented properties, the same facility is not extended to hospitals.


It is widely expected that the rate of central sales tax would be brought down to 1% and if implemented that would certainly be a welcome measure, long overdue.

Another aspect that requires the immediate attention of the Finance Minister is the backlog of cases stuck in appeals before the Tribunal and in Courts on the indirect tax front. Recently, it has been reported that there are a whopping 100,000 cases pending before CESTAT alone. Add to this the cases pending at various levels in departmental adjudication, the number could be mind-boggling. If this pendency has to be brought down to controllable levels, radical measures have to be implemented, including conciliation process for litigation between Government departments and public sector units owned substantially by the Government; vesting Chief Commissioners with appellate powers in certain cases, on the lines of the Revisionary authority constituted for disposing drawback matters.

It is very encouraging to note that the right signals are being sent out about the introduction of GST. This could well be the game changer, not only from a tax perspective, but also to revive and breathe life into the India growth story. There has been a clamor from the industry to shift from the complex tax structure to a simple GST. Investors are anxiously waiting for the new Government to announce the realistic roadmap for implementation of Goods & Services Tax (GST). It is imperative that a practical roadmap is drawn up and announced, so that industry gets sufficient time to prepare for the new tax regime. Needless to say, much of the success of the GST will depend on the IT-enablement and ease in compliance with rationalized rate structure having fewer exemptions. Globally, the perception is about India being a ‘difficult to do business’ jurisdiction. A concrete announcement on GST introduction with timelines, however broad that may be, would go a long way in reversing this negative feeling about doing business in India.


Copyright © Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of is prohibited.