Impact of Service Tax and Excise duty hike on Common man in Budget 2012-13 :
Now the budget has been produced in Parliament by our Finance Minister for FY 2012-13. Our FM has tried his best to control the Fiscal Deficit . He has also proposed the increase in Excise and Service Tax and we all are keen to know that how and how much it will impact to the individual and industry. Here I am trying to analyse that impact of tax increase :
First of all As per tax point of view any activity for consideration called " Service" and almost all services except some 17 Services listed on negative list are taxable.
Service tax and excise duty have been hiked by 2% across all categories. The minimum individual tax payer exemption limit has been increased from Rs 1.8 lakh to 2.0 lakh result only 2000 Rs gain. At present for example suppose spending on goods and services per month Rs 30k. The increase in excise duty on goods will indirectly increase in value added tax (VAT ) on goods (already paid increased excise duty) by 0.26%.
Hence the minimum additional tax incurred by the consumer on account of service and excise tax would be about . 15,300 as against the increase in the disposable income of . 2,000 only !
If you are in higher tax bracat say 20 lakh per annum, your disposable income will go up by . 22,600 and the impact of service tax and excise duty hike on you could be neutral.
Despite of tax exemption for Bollywood and STT ( Security Transaction Tax) cut on delivery based volume , we should not forget about 12.36 % service tax which every individual tax payer has to paid .
There are some confusions, which will be rectified before the Budget is passed. The provision for taxation of bundled services states that in case such services are not normally bundled, the highest tax rate shall apply. If they are “naturally bundled in the course of business”, the nature of services shall be determined based on the service that gives them the essential characteristics. The question is which services are naturally bundled and which one of them gives it essential characteristics shall give rise to much more confusion.
It is very clear to all of us that Indian government avoided bold reforms in its annual Budget on Friday, opting for cautious steps for growth and anti-deficit measures, including an increase in services and excise taxes. The government set a fiscal deficit target of 5.1% of GDP in 2012-13 FY.
From the last budget experince we all can clear guess whether the govt would get sucess to achieve the fiscal deficit target 5.1 % or not.
Overall, however, the government and policymakers have done a reasonable job on the reform front and this budget has nothing for common man .
Any way we all have to live with it.
Dear readers , please send your feedback and query I would really appreciate and welcome the same
Regards :
Arvind Trivedi
Now the budget has been produced in Parliament by our Finance Minister for FY 2012-13. Our FM has tried his best to control the Fiscal Deficit . He has also proposed the increase in Excise and Service Tax and we all are keen to know that how and how much it will impact to the individual and industry. Here I am trying to analyse that impact of tax increase :
First of all As per tax point of view any activity for consideration called " Service" and almost all services except some 17 Services listed on negative list are taxable.
Service tax and excise duty have been hiked by 2% across all categories. The minimum individual tax payer exemption limit has been increased from Rs 1.8 lakh to 2.0 lakh result only 2000 Rs gain. At present for example suppose spending on goods and services per month Rs 30k. The increase in excise duty on goods will indirectly increase in value added tax (VAT ) on goods (already paid increased excise duty) by 0.26%.
Hence the minimum additional tax incurred by the consumer on account of service and excise tax would be about . 15,300 as against the increase in the disposable income of . 2,000 only !
If you are in higher tax bracat say 20 lakh per annum, your disposable income will go up by . 22,600 and the impact of service tax and excise duty hike on you could be neutral.
Despite of tax exemption for Bollywood and STT ( Security Transaction Tax) cut on delivery based volume , we should not forget about 12.36 % service tax which every individual tax payer has to paid .
There are some confusions, which will be rectified before the Budget is passed. The provision for taxation of bundled services states that in case such services are not normally bundled, the highest tax rate shall apply. If they are “naturally bundled in the course of business”, the nature of services shall be determined based on the service that gives them the essential characteristics. The question is which services are naturally bundled and which one of them gives it essential characteristics shall give rise to much more confusion.
It is very clear to all of us that Indian government avoided bold reforms in its annual Budget on Friday, opting for cautious steps for growth and anti-deficit measures, including an increase in services and excise taxes. The government set a fiscal deficit target of 5.1% of GDP in 2012-13 FY.
From the last budget experince we all can clear guess whether the govt would get sucess to achieve the fiscal deficit target 5.1 % or not.
Overall, however, the government and policymakers have done a reasonable job on the reform front and this budget has nothing for common man .
Any way we all have to live with it.
Dear readers , please send your feedback and query I would really appreciate and welcome the same
Regards :
Arvind Trivedi
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