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TMI BlogBudget 2012 Highlights - Quick ReviewX X X X Extracts X X X X X X X X Extracts X X X X ..... Budget 2012 Highlights - Quick Review - By: - Swati Dodhi - Budget - Dated:- 17-3-2012 - - Highlights of the Union Budget for 2012-13 (Apr-Mar) presented by Finance Minister Pranab Mukherjee in Lok Sabha GROWTH * FY13 GDP seen 7.6% plus or minus 25 bps * India GDP seen growing 6.9% in FY12 * FY12 fiscal gap revised to 5.9% of GDP vs 4.6% target * Met 99% of total plan outlay FY12 * Growth moderated, fiscal balance deteriorated FY12 * India is still global frontrunner in econ growth * FY12 econ performance has been disappointing * FY12 reality turned different from anticipation * FY12 was a year of recovery interrupted for economy * Need credible roadmap to meet objectives * Demand driven growth is objective of budg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et * FY12 services growth seen 9.4% * FY12 industry growth seen 3.9% * FY12 farm growth seen 2.5% * Farm, services continued to perform well * Need to improve supply side management * Need to accelerate pace of reforms * Manufacturing sector on path of recovery * "Mere words are not enough" INFLATION * Headline inflation remained hard for most of FY12 * Inflation to be lower in FY13 than in FY12 * Inflation largely structural in nature * Headline inflation seen stable after few MOS * Prolonged period of high inflation tends to get generalised * Inflation driven by farm supply constraints FY13 TARGETS * Revenue gap seen 1.8% of GDP * Tax proposals move forward on DTC, GST * To fund around 93% of FY13 fisc gap via ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowing * Fiscal deficit pegged at 5.13590 trln rupees * Revenue deficit seen 1.85 trln rupees * Net market borrow pegged at 4.79 trln rupees * Oil subsidy to be paid in cash, not as bonds * Fiscal gap estimated 5.1% of GDP * Non plan spend seen up 18.8% vs FY12 budget estimate * Non plan spend seen up 8.7% vs FY12 revised estimate * 3.65 trln rupees total transfer to states * Subsidy has pushed up non-plan spend * Plan expenditure seen 5.21 trln rupees, up 18% * Non plan expenditure seen 9.69 trln rupees * Total expenditure 14.9 trln rupees * Non-tax revenue receipts 1.6 trln rupees * Net tax receipt estimated 7.7 trln rupees * Aim Gross Tax to GDP ratio at 10.6% * Aim gross tax receipt of 10.77 trln rupee, up 15.6% * A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im to trim revenue deficit FY13 * To implement advance pricing for foreign investors * Allocated 1.9 trln rupees for defence * Expect FY13 current acct deficit to be smaller than FY12 FISCAL HEALTH * FY12 current account gap seen around 3.6% of GDP * To introduce new law for micro finance cos * External sector development encouraging in H1 FY12 * Tight monetary policy impacted investment in FY12 * FRBM implementation now back on track * To make some amendments to FRBM Act * To provide for medium term expenditure target * FY12 fiscal balance worsened on direct tax mop-up slippage * FY12 average crude price seen $115/bbl vs $90 estimated * High interest rates hurt corporate taxes FY12 * FY12 fiscal balance deteriorated due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to subsidies * External trade in FY12 first half was encouraging * India successfully diversified export, import markets * Signs of recovery in coal, fertilizer, cement sectors * Indian manufacturing appears to be on curve of revival * Concept of effective revenue deficit to be fisc parameter * Slowdown can almost totally be ascribed to industry * Global crisis has affected us INDIRECT TAX * Securities transaction tax cut 20% to 0.1% * 15% tax on dividends from foreign arms extended 1 more yr * Withholding tax on ECB interest cut to 5% for power cos * Corporate tax rate left unchanged * To reopen tax assessment for 15 yrs for overseas assets * 20% additional depreciation on assets bought by power cos * Weighted cut of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00% extended to 5 yrs for in-house R D * Adds ad valorem duty on some cigarettes * Duty on refined gold hiked to 3.0% from 1.5% * Excise duty on processed food products cut to 6% * Excise duty on all raw food products cut to 6% merit rate * Customs duty up on gold imports * Concessions on hybrid vehicle extended * Solar power equipment, CFL exempt from CVD * Excise duty on LED lamps cut to 6% * Tax collection at source for coal, lignite, iron ore DIRECT TAX * 10% tax on 200,000-500,000 rupees personal income * 20% tax on 0.5-1.0 mln rupees personal income * 30% tax on personal income above 1 mln rupees * 5,000 rupees exemption for preventive health check up * 10,000 rupees tax deduction on savings bank interest * FY13 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral tax exemption limit hiked to 200,000 rupees * To tax unexplained money at highest rate of 30% * Tax on undeclared income 30% irrespective of income slabs * Revenue loss of 45 bln rupee on direct tax sops FY13 TAX REFORMS * 82 double tax pacts finalised FY12 * To table white paper on black money in current session * New tax exemption on individual share invest with lock-in * Advanced pricing agreement in DTC to be in Finance Bill * GST under progress, talks with states on for draft law * GST network to get operational from Aug * To examine Parliament panel report on Direct Taxes Code * Rajiv Gandhi Equity Savings Scheme launched * Rajiv plan equity invest lock in period to be 3 yrs * 50,000 rupee tax exempt for shr in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vest in new Rajiv plan * To allow 100 bln rupees power sector tax free bonds FY13 * To allow 50 bln rupees SIDBI tax free bonds FY13 * To allow 50 bln rupees HUDCO tax free bonds FY13 * To allow 100 bln rupees IRFC tax free bonds FY13 * To allow 100 bln rupees NHAI tax free bonds FY13 * To allow 600 bln rupees tax free bonds FY13 * To OK 50 bln rupee National Housing Bk tax free bonds * 1% loan sop plan for home loans up to 2.5 mln rupees * Interest subvention on low cost homes extended by 1 yr * Only 2.5% customs duty on iodine * 6 specialised life saving drugs exempt from excise duty * Raised customs duty on bicycles to 30% vs 10% * Fully exempt from basic customs duty mobile phone parts * Fully exempt from basic customs dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y LCD, LED panels parts * Customs duty cut on some parts for low cost medical device * 10% excise duty on branded retail garments * Cut basic customs duty on titanium dioxide to 7.5% * Tunnel boring machine import duty free, no end use limit * Cut import duty on equipment used in iron ore pellet unit * Customs duty cut on plant, machinery for iron ore, pellets * Customs duty on iron ore mine machine cut to 2.5% vs 7.5% * Full import duty exemption for road construction machinery * Some aircraft parts exempt from customs duty * Cut customs duty on mining machinery to 7.5% from 10.0% * To cut customs duty on rail equipment to 7.5% vs 10% * Full exempt coal mining projects from basic customs duty * Coal for thermal power cos exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from customs duty * Customs duty on surveying, mining equipment cut * Full customs duty exemption on coal for thermal plants * Full customs exemption for imports to set up fert units * Water soluble fertilisers customs duty cut to 5% vs 7.5% * Basic customs duty 5% on coffee plantations equipment * No change in peak rate of customs duty * Standard excise rate hiked to 12% vs 10% * Svc tax hike to yield 186.6 bln rupee extra revenue FY13 * Panel to study svcs tax, central excise for common code * Common return form for service tax, excise duty * Service tax exemption for some svcs related to cinema * Only 17 items in negative list for service tax * Introduces exemption list for service tax * To tax all services except those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in negative list * Service tax needs to be aligned with excise duty FARM, FOOD * FY13 farm outlay 202 bln rupees, up 18% on yr * More 3% rate subvention for farmers repaying loans on time * To raise target for farm credit to 5.75 trln rupees FY13 * 5.75 trln rupees farm credit FY13 * Allocated 2 bln rupees for R D of seeds * Allot 5 bln rupees for aquaculture FY13 * Allocation to farm dev plan RKVY hiked to 92.17 bln rupee * Allotted 4 bln rupee to up kharif output in northeast FY12 * Allot 10 bln rupees to up kharif output in northeast FY13 * Allocated 3 bln rupees for FY13 irrigation plan * 5-bln-rupee pilot plan in 12th Plan for geo textiles in NE * Green Revolution in east has boosted paddy output * East Indian stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es produced 7 mln tn more of paddy * To set up govt-owned irrigation promotion company * Need to bridge gap in food storage, transportation * To add 5 mln tn more grain storage capacity by FY13 * To start national food processing mission FY13 * Allocates 2 bln rupee for farm research * Micro-irrigation allotment up 13% to 142.42 bln rupees. * Agriculture continues to be govt's priority * To set up 3 technical assistance centres for textiles * India to be self sufficient in urea production in 5 yrs * Announces 2 new handloom mega clusters * 1 bln rupees to N G Ranga farm university in Hyderabad * 1 bln rupees allotted for Kerala Agriculture University RURAL, SOCIAL SECTOR * PDS network created via UID platform to start Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Allocated 250 mln rupees for institute of rural mgmt FY13 * 84.47 bln rupees for natl social assistance plan FY13 * To set up credit guarantee fund for skill development * Allocates 12.76 bln rupee for micro-enterprises, up 23% * To set up credit guarantee fund for poor students * 12.76 bln rupee FY13 for PM employment generation plan * Allotted 10 bln rupees for skill development plan FY13 * Women self-help group sops on loans up to 300,000 rupees * 39.15 bln rupee FY13 for Rural Livelihood Mission, up 34% * 3% more interest subvention to women self help groups * Allocated 255.55 bln rupee under Right to Education * Allotted 208.22 bln rupees for rural health plan FY13 * No new case of polio reported in last one year * Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit guarantee fund proposed for poor students * Voluntary Savings for Pension plan has 500,000 subscriber * To up pension to disabled to 300 rupees/mo * To give 100 bln rupees to NABARD to refinance rural bks * Allocated 31.24 bln rupees for secondary education FY13 * To set up credit guarantee fund for education * Allot 120.4 bln rupees for backward region growth FY13 * Allocated 50 bln rupee for warehousing expansion * Allotted 200 bln rupees for rural infra dev fund FY13 * 140 bln rupees for rural drinking water plan FY13 * Allotted 240 bln rupees for rural road plan FY13 * FY13 mid-day meal allocation 119.4 bln rupee vs 103.8 bln * Allotted 158.50 bln rupees for child development FY13 * Allotted 371 bln rupees for SC, ST in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive growth FY13 * Computerisation of PDS to be completed by Dec * Divest funds for social sector extended for 1 more yr * 150 mln rupees for Natl Centre for Applied Econ Research * To allocate funds for 400 mln more UID registration FY13 FINANCIAL SECTOR, BANKS * India Opportunity Venture Fund via SIDBI * SIBDI to start 50 bln rupee India Opportunity Venture Fund * To issue revised norms for bks' priority sector lending * To move National Housing Bank Amendment bill * To move Regional Rural Bank Amendment bill * To create financial holding co to help banks raise funds * To set up fincl holding co for recapitalisation of bks * To move bills for Public Debt Mgmt, NABARD Act amendment * 158.88 bln rupees for capitalizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of PSU banks FY13 * Propose electronic voting to up shareholder involvement INFRASTRUCTURE * 12th Plan invest for infra at 50 trln rupees * ECBs allowed to part finance rupee debt of power project * Inter-ministerial panel to monitor allocated coal mines * Coal India told to sign coal supply pacts with power cos * Viability gap funding for oil, gas pipelines, storage * Telecom towers to get Viability gap funding FY13 * Irrigation, fertiliser, terminal mkt under viability gap funding * Irrigation including dams under viability gap funding FY13 * Lack of adequate infrastructure major constraint to growth * Extend plan to capitalize regional rural banks by 2 yrs * Lack of adequate infra major constraint to growth * IPOs o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f over 100 mln rupees have to be in electronic form * To set up 2 handloom mega clusters * Allot 700 mln rupees for Maharashtra power loom cluster * Gives 40 bln rupees FY13 for rural housing vs 30 bln FY12 * Realtors can borrow overseas for low-cost home projects * To allow External Commercial loans for affordable housing * Airlines can borrow overseas to meet working capital needs * To allow 1 yr ECBs of $1 bln for airline cos * To allow 49% FDI in airlines under active consideration * Foreign borrow for capex to maintain, operate toll roads * Mulling 49% FDI by foreign airlines in local carriers * Up NHDP allocation 14% to 253.6 bln rupees FY13 * Allowed direct import of ATF by Airlines * Targeting 8,800 km projects under NH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DP FY13 SUBSIDY * Subsidy for food security law to be fully provided for * Some subsidies are inevitable in a growing econ * Fiscal policy had to absorb subsidy payments * Aim is to directly transfer kerosene subsidy to individual * Testing kerosene subsidy transfer to beneficiaries in Rajasthan * Aim to directly transfer subsidy on LPG to consumers * Direct kerosene subsidy transfer pilot for 50 districts * Direct transfer of fertiliser subsidy to retailer, farmers soon * To bring subsidies to 1.7% of GDP next 3 years * Direct transfer of subsidy to be gradually rolled out * To try to restrict subsidies to 2% of GDP in FY13 * Subsidies inevitable but not good if they hit macro econ DIVESTMENT * To raise 300 bln rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees via divestment FY13 * Raised around 140 bln rupee via divest FY12 MISCELLANEOUS * Need to address the issue of black money, corruption * Cos to file compulsory report on assets held abroad * Effort on for consensus on FDI in multi-brand retail * To complete national population register in 2 years * Govt to retain 51% control in central PSUs * To allow qualified foreign investors in corp bond mkt * Have to address problem of malnutrition * To extend Swabhimaan scheme to some NE areas FY13 - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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