With absence of an explicit overall provision for the Seventh Pay Commission in Budget raising questions, government today said the once-in-a-decade pay hike has been built in as interim allocation for different ministries and Budget numbers were credible.

The voluminous Budget documents state that “the implementation of the Seventh Pay Commission due from January 1, 2016 is to be implemented during the financial year 2016-17 as also the revised One Rank One Pension scheme for Defence services.”

“The government has made provisions for the additional liabilities on these count,” it said, without giving the amount allocated for implementation.

Economic Affairs Secretary Shaktikanta Das said the number cannot be quantified and it has been built up in budget of various ministries.

“We cannot really quantify how much we require in 2016-17. Because the Secretaries Committee have to first give its recommendations, then government will take a decision and then only we will know what is the requirement in FY17,” he said here.

Implementation of the pay commission report is to cost the government Rs 1.02 lakh crore.

“We have the Pay Commission recommendations with us, we have analysed the likely requirement and it has been built into the Budget of various ministries. Some suitable interim provisions have been made,” he said without elaborating. “Hence the expenditure and revenue numbers are credible.”

Das said Finance Minister Arun Jaitley in his Budget speech stated that interim provisions have been made. “And these provisions are there in the Demands for Grants for individual departments and ministries. It is built into and subsumed into those allocations.”

“The Budget reaffirmed the commitment of the government to continue with the process of fiscal consolidation as projected in the Medium Term Fiscal Policy Statement of 2015-16 despite a tough external environment,” the Budget documents said.

Accordingly, fiscal deficit has been projected at 3.5 per cent of GDP in 2016-17. “In accordance with the amended FRBM targets, the fiscal deficit of 3 per cent is projected to be achieved in 2017-18 onwards.”

“Keeping in view the challenge of reduction of fiscal deficit by 0.4 per cent of GDP in a difficult year in 2016-17 with substantial additional liabilities on pay revision etc, the government is quite optimistic of fully achieving the fiscal deficit target of 3 per cent or below by March 2018,” the documents said.

Inputs with PTI

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“Main consideration in the private and public sector being ‘profit’, and in Central Government it is “service” even through Railways, Income Tax & Central Excise are revenue earning departments, hence an equal comparison with the Government is not going to be ever possible. Performance for the Government is usually not measured in terms of profit, but in terms of achieving societal goals.”

Union budget 2016-17 and 7th CPC demands

The Union budget 2016-17 presented by Hon’able Finance Minister in the parliament on 29th Feb 2016 has the total expenditure in the Budget for 2016-17 has been projected at Rs 19.78 lakh crore, consisting of Rs 5.50 lakh crore under Plan and Rs 14.28 lakh crore under Non-Plan. The increase in Plan expenditure is in the order of 15.3% over current year.

The fiscal deficit in RE 2015-16 and BE 2016-17 have been retained at 3.9% and 3.5% of GDP and the growth of GDP has now accelerated to 7.6%. This clearly shows that the finance of the Central Government is in good shape.

The Hon’able Finance Minister in the parliament on 29th Feb 2016 has stated that the next financial year 2016-17 will cast an additional burden on account of the recommendations of the 7th Central Pay Commission and the implementation of Defence OROP.

Let us examine the last year spending on various ministries

This clearly shows many ministries have not spent the money allocated, this due to mainly the shortage of talented staff and various policies’ of the Government.

Today, the weakest link in respect of any government policy is at the delivery stage. This phenomenon is not endemic to India. Internationally also, there is an increasing emphasis on strengthening the delivery lines and decentralization with greater role being assigned at delivery points, which actually determines the benefit that the common citizen is going to derive out of any policy initiative of the government.

More the talented persons are there in Government services, more the delivery of the government schemes will be there, thus the Government machinery will be more effective and common man will benefit a lot.

The 7th CPC has not improved the service condition of the Central Government employees, it has provided just 14.3 % wage hike against the staff side demand of more than 70% wage hike.

The person joining a Government Service is not just for the employment is for a whole career, if a person joins a Government Service he will quit/ retire from the job only after putting 30 years service or more. In case of the person joining a private company he will jump from one company to another at least five times in thirty years.

The talented persons from all over the country are moving to IT, BT and private sectors, rather than Central Government sector. Because of the lower salary / pay structure in Central Government sector compared to IT and BT sectors and complex nature of rules and regulations in Central Government sector and also the skill and merit of the worker/ employee is not into account in Central Government sector.

Main consideration in the private and public sector being ‘profit’, and in Central Government it is “service” even through Railways, Income Tax & Central Excise are revenue earning departments, hence an equal comparison with the Government is not going to be ever possible. Performance for the Government is usually not measured in terms of profit, but in terms of achieving societal goals.

The minimum wage should be calculated using Dr Aykroyd formula and following 15th ILC norms. The actual market rates should be adopted , not the imaginary rates as provided the 7th CPC should be adopted . This will pay way of meaningful wage hike and fitment formula. House rent is from Rs 7000/- per month to Rs 35,000/- per month. The 7th CPC has provided just from Rs 3000/- to Rs 25,000/- per month. The old HRA rates should be adopted.

The strength of Central government employees should increase. In 1990 Population of the country is 85 crores – Central Government Employees strength is 40 lakhs . In 2014 Population of the country is 125 crores – Central Government Employees strength is 31 lakhs. India has 1,622.8 government servants for every 1,00,000 residents. In sharp contrast, the U.S. has 7,681. The Central government, with 3.1 million employees, thus has 257 serving every 1,00,000 population, against the U.S. federal government’s 840.

Non-filling up of vacant posts has resulted in increased work load on the existing employees and delivery of the Government schemes.

Hence the Government should adopt a proper wage policy for the central Government employees and improve vastly the 7th CPC recommendations and fill up vacant post to deliver the Government schemes to the needy of the country. Now that the Central Government finances are good. This way both Central Government employees will benefit and the common man will also benefit.

Source: http://karnatakacoc.blogspot.in/

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INTRODUCTION : Growth of Economy accelerated to 7.6% in 2015-16

CHALLENGES IN 2016-17 : Risks of further global slowdown and turbulence.

ROADMAP & PRIORITIES :  ‘Transform India’ to have a significant impact on economy and lives of people

AGRICULTURE AND FARMERS’ WELFARE : Allocation for Agriculture and Farmers’ welfare is Rs. 35,984 crore

RURAL SECTOR : Allocation for rural sector – Rs.87,765 crore.

SOCIAL SECTOR INCLUDING HEALTH CARE : Allocation for social sector including education and health care – Rs.1,51,581 crore.

EDUCATION, SKILLS AND JOB CREATION : 62 new Navodaya Vidyalayas will be opened

SKILL DEVELOPMENT : Allocation for skill development – Rs. 1804. crore.

JOB CREATION : GoI will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment. Budget provision of Rs. 1000 crore for this scheme

INFRASTRUCTURE AND INVESTMENT : Total investment in the road sector, including PMGSY allocation, would be Rs. 97,000 crore during 2016-17.

FINANCIAL SECTOR REFORMS  : A comprehensive Code on Resolution of Financial Firms to be introduced.

GOVERNANCE AND EASE OF DOING BUSINESS : A Task Force has been constituted for rationalisation of human resources in various Ministries

FISCAL DISCIPLINE : Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%

RELIEF TO SMALL TAX PAYERS : Raise the ceiling of tax rebate under section 87A fromRs. 2000 to Rs. 5000 to lessen tax burden on individuals with income upto Rs.5 laks

BOOST EMPLOYMENT AND GROWTH : Increase the turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act to Rs. 2 crores to bring big relief to a large number of assessees in the MSME category.

MAKE IN INDIA : Changes in customs and excise duty rates on certain inputs to reduce costs and improve competitiveness of domestic industry

MOVING TOWARDS A PENSIONED SOCIETY : Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS).

PROMOTING AFFORDABLE HOUSING : 100% deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro cities and 60 sq. metres in other cities

RESOURCE MOBILIZATION FOR AGRICULTURE, RURAL ECONOMY AND CLEAN ENVIRONMENT : Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of Rs.10 lakh per annum

PROVIDING CERTAINITY IN TAXATION : Committed to providing a stable and predictable taxation regime and reduce black money.

SIMPLIFICATION AND RATIONALIZATION OF TAXES : 13 cesses, levied by various Ministries in which revenue collection is less than ` 50 crore in a year to be abolished.

TECHNOLOGY FOR ACCOUNTABILITY : Expansion in the scope of e-assessments to all assessees in 7 mega cities in the coming years.

Authority: www.indiabudget.nic.in

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The limit of deduction of house rent paid under section 80GG has also been raised to Rs. 60,000 from the existing Rs. 24,000 per annum to give relief to employees who live in rented houses.

Certain Tax Reliefs announced for small tax payers and others

While presenting the General Budget 2016-17 in Lok Sabha here today, the Union Finance Minister Shri Arun Jaitley said that the taxation is a major tool available to Government for removing poverty and inequality and this has to be cautiously exercised. But, he would like to give relief to small tax payers, the Finance Minister added.

Thus the ceiling of tax rebate under Section 87A of IT Act has been proposed to be raised to Rs. 5,000 from Rs. 2,000 for individuals with income less than Rs. 5 lakhs. He said that above 2 crore tax payers would get a relief of Rs. 3,000. The limit of deduction of house rent paid under section 80GG has also been raised to Rs. 60,000 from the existing Rs. 24,000 per annum to give relief to employees who live in rented houses.

Under the presumptive taxation scheme under Section 44AD of the Income tax Act, the limit of turnover or gross receipts has been raised to two crore rupees from the exiting one crore rupees to benefit about 33 lakh small business people. It frees a large number of such assesses in the MSME category from the burden of maintaining detailed books of account and getting audit done.

The presumptive taxation scheme is to be now extended to professionals with gross receipts up to Rs. 50 lakh with the presumption of profit being 50% of the gross receipts.

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The travel and other expenses of Union Ministers have been slashed by a whopping 54 per cent in the 2016-17, according to the Budget proposals presented by Finance Minister Arun Jaitley today in Parliament.

The budget estimates, the amount allocated under the head of ‘Tour Expenses’ has been fixed at Rs 259 crore.

The expenditure under this head, which covers salaries, sumptuary and other allowances and travel of Cabinet Ministers, Ministers of State and ex-Prime Ministers, was pegged at Rs 269 crore for 2015-16.

However, the budgetary expenses under this head, which also covers maintenance of VVIP aircraft, was revised later to Rs 566.66 crore.

This year, the government has introduced Rs 4.35 crore under the head of ‘Hospitality and Entertainment’ under which expenditure on government hospitality and entertainment of foreign state guests and official entertainment arranged at Rashtrapati Bhawan on behalf of the Vice President and the Prime Minister.

It also includes reception on national days, investiture ceremonies and presentation of credentials.

Inputs with PTI

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100% Deduction of Profits for 3 out of 5 Years for Start-Ups

Withdrawal upto 40% of the Corpus to be Tax-Free at the time of Retirement

Deduction of Additional Interest of Rs.50,000 Per Annum for First-Time Home buyers

New Dispute Resolution Scheme to be Introduced

Thirteen Cesses Levied by Various Ministries having Revenue Collection less than Rs.50 Crore to be Abolished

‘E-Sahyog’ and ‘E-Assessment’ to be Expanded Further

100% Deductions for Profits to an undertaking in Housing Project for Flats up to 30 Sq. Mtrs.

The Union Finance Minister Shri Arun Jaitley said that taxation is a major tool available to government for removing poverty and inequality from the society. He enlisted 09 categories of thrust in his text proposals which include (1) Relief to small tax payers (2) Measures to boost growth and employment generation (3) Incentivizing domestic value addition to help Make in India (4) Measures for moving towards a pensioned society (5) Measures for promoting affordable housing (6) Additional resource mobilization for agriculture, rural economy and clean environment (7) Reducing litigation and providing certainty in taxation (8) Simplification and rationalization of taxation (9) Use of technology for creating accountability.

Announcing relief to small tax payers Shri Jaitley proposed to raise the ceiling of tax rebate U/s. 87A from Rs.2000 to Rs.5000. With this, individuals having income up to Rs.5 lakh will get a relief of Rs.3000 in their tax liability. He also proposed to increase the limit of deduction of rent paid U/s.80 GG from Rs.24,000 per annum to Rs.60,000 to provide relief to those who live in rented houses. Shri Jaitley proposed to increase the turnover limit under presumptive taxation scheme U/s.44 AD of the Income Tax Act to Rs.2 Crores from existing limit of Rs.1 Crore which will benefit more than 30 lakh small business people. He also proposed to extend the presumptive taxation scheme with profit deemed to be 50%, to professionals with gross receipts up to Rs.50 lakh.

PIB

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Union Finance Minister Shri Arun Jaitley spoke on the Key Reform Measures in his Budget speech 2016-17

1. The Government is firm on its course towards fiscal consolidation without compromising on its development agenda. 3.5% fiscal deficit is targeted for FY 2017.

2. Total allocation for Agriculture, Farmers’ welfare and Irrigation set at Rs. 47,912 cr, which is nearly twice the allocation of the previous year.

3. New Health Protection scheme will provide health cover up to Rs. 1 lakh per family and additional Rs. 30,000 for senior citizens.

4. Free LPG connections will be provided in the name of woman member of a family to 1.5 cr BPL households in 2016-17 and to continue for two more years to cover 5 cr households in total.

5. Massive increase in public spending on infrastructure to Rs. 2.21 lakh cr, an increase of 22.5% over the previous year.

6. Higher Education Financing Authority set up, with an initial capital base of Rs. 1,000 cr to promote higher education. In addition, 10 public and 10 private institutions to emerge as world-class Teaching and Research Institutions.

7. Promoting a tax-friendly regime and minimizing hassles due to litigation through a New Dispute Resolution Scheme with low or zero penalties. Ongoing tax cases can be settled with ease.

8. Increased relief for middle-class tax-payers by raising the ceiling of tax rebate under Section 87A to Rs. 5,000 for individuals with income less than Rs. 5 lakhs and by raising the limit of deduction of rent paid under section 80GG to Rs. 60,000.

9. Directly providing financial and other subsidies benefits to people who deserve them by enacting a new law and developing a social security platform using Aadhar.

10. Boosting formal sector employment by provisioning Rs. 1,000 cr towards contributing 8.33% on behalf of all new employees enrolling in EPFO for the first three years of their employment.

11. Simplified and pro-market tax measures such as laying out the roadmap of phasing out of exemptions under Corporate Taxes, abolishing small cesses, providing complete pass through of income-tax to securitization trusts and reducing period of obtaining long-term capital gains treatment for unlisted companies to three years.

12. Promoting entrepreneurship by increasing the turnover limit under Presumptive taxation scheme to Rs. 2 cr, targeting to disburse loans worth Rs. 1.8 lakh cr under PM Mudra Yojana and providing 100% deduction of profits for 3 out of 5 years for start-ups.

13. Facilitating Affordable Housing by 100% tax exemption for profits from small projects, not subjecting distribution REITs and INVITs to Dividend Distribution Tax and encouraging small first-time home buyers by deducting ¬additional interest of Rs. 50,000.

14. Reducing black money through a scheme to declare undisclosed income by paying 45% tax in a given compliance window.

15. Strengthening the financial sector by allocating Rs. 25,000 cr towards recapitalising Public Sector Banks (PSBs), listing Government-owned General Insurance companies, and spelling out a roadmap for consolidating PSBs.

Source: PIB News

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HRA deduction increased to Rs. 60,000 per annum; 40% of withdrawal under NPS to be tax exempt; additional exemption for housing loans.

Finance Minister Arun Jaitley presents his third Union Budget. With an eye on supporting the small tax-payer and the small investor, the Minister announced a slew of schemes, and income tax exemptions.

As it happened:

12.41 p.m.: Finance Minister Arun Jaitley tables the Union Budget 2016 and the Finance Bill.

12.40 p.m.: Rs. 1,060 crore revenue loss through direct tax proposals, and Rs. 20,670 crore revenue gain through indirect tax proposals. Revenue gain of Rs 19,600 crore in Union Budget 2016 proposals.

12.39 p.m.: 13 different cesses levied by various ministries with collections less than Rs.50 crore a year to be done away with.

12.38 p.m.: No Service Tax for houses built under 60 square metres.

12.35 p.m.: Excise duty on tobacco increased by 10-15 per cent.

12.34 p.m.: Committed to stable taxation regime. No more retrospective amendments.

12.29 p.m.: 4% high capacity tax for SUVs.

12.28 p.m.: Limited period compliance window for domestic taxpayers to declare undisclosed income. Declarations to have immunity from prosecutions.

12.26 p.m.: No changes have been made to existing income tax slabs.

12.25 p.m.: Infrastructure and agriculture cess to be levied.

12.23 p.m.: 1 per cent service charge on purchase of luxury cars over Rs. 10 lakh and in-cash purchase of goods and services over Rs. 2 lakh.

12.22 p.m.: Additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh, provided cost of house is not above Rs. 50 lakh.

12.20 p.m.: 40% of withdrawal at the time of retirement under National Pension Scheme to be tax exempt.

12.19 p.m.: Tax holiday for startups for three of five years of setting up the company

12.13 p.m.: Lowering of Corporate IT rate for companies not exceeding Rs. 5 crore turnover to 25% plus surcharge.

12.09 p.m.: People with income less than Rs 5 lakh to get deduction of Rs 5,000, up from Rs 2,000 last year. HRA deduction up from Rs. 24,000 to Rs. 60,000 p.a.

12.08 p.m.: Rs. 100 crore for Deendayal Upadhyay’s birthday celebrations and Guru Gobind Singh 300th birth anniversary.

12.07 p.m.: Classification of expenditure as plan and non-plan to be done away with.

12.06 p.m.: Govt plans to spend Rs 19.78 lakh crore in 2016-17 — Rs 5.5 lakh crore under plan head, Rs 14.28 lakh crore under non-plan head.

12.06 p.m.: FIscal deficit at 3.5% of GDP in 2016-17.

12.04 p.m.: A bill on targeted delivery of financial services using Aadhar to be introduced.

12.03 p.m.: Amendment to the Companies Act to ensure speedy registration and boost start-ups.

12.02 p.m.: Rs. 900 crore for buffer stock of pulses.

12.01 p.m.: Dept of Disinvestment renamed as Dept of Investment and Public Asset Management.

12 noon: Direct Benefit Transfer for fertiliser subsidy.

11.59 a.m.: EPF at 8.33 per cent for new employees joining the scheme.

11.58 a.m.: Rs. 25,000 crore for recapitalisation of public sector banks. General insurance companies owned by the govt to be listed in stock exchanges.

11.56 a.m.: Amendmends to boost Asset Reconstruction Companies to manage NPAs of public sector banks.

11.55 a.m.: RBI Act to be amended to set up monetary policy committee.

11:53 a.m.: 100% FDI through FAPB route in marketing of food products produced and manufactured in India.

11.49 a.m.: Total outlay on infrastructure in 2016-17 is Rs. 2,21,246 crore

11.47 a.m.: In the power sector, the govt is drawing up a plan for 15-20 years to augment investment in nuclear power. Rs. 3,000 crore per annum for this.

11.45 a.m.: There are 160 airports and airstrips which can be revived.

11.44 a.m.: Motor Vehicles Act to be amended to enable entrepreneurship in the road transport sector.

11.43 a.m.: Total outlay for infrastructure is at Rs. 2.31 lakh crore.

11.42 a.m.: Rs. 97,000 crore for all roads. Total outlay on roads and rails will be Rs. 2.80 lakh crore. 10,000 km of national highways in 2016-17 and 50,000 km state highways to be converted to NH roads.

11.41 a.m.: More than 70,000 road projects were languishing at the beginning of the year. Nearly 85% of these projects have been put back on track.

11.39 a.m.: Small shops should be given the choice to remain open on all 7 days a week.

11.37 a.m.: Rs. 1,700 crore for 1500 multi-skill development centres.

11.35 a.m.: 10 public and 10 private educational institutions to be made world-class. Digital repository for all school leaving certificates and diplomas. Rs. 1,000 crore for higher education financing.

11.34 a.m.: Hub to support SC/ST entrpreneurs.

11.33 a.m.: National dialysis service programme under PPP model. LPG connection for women members of rural homes.

11.30 a.m.: Government to provide health insurance of upto Rs. 1 lakh per family; top up of Rs. 35,000 for people above 60 years. 3,000 stores to be opened for generic drugs.

11.30 a.m.: Total rural sector allocation Rs. 87,769 crore.

11.27 a.m.: Two schemes for digital literacy for rural India to cover 6 crore households in the next three years.

11.26 a.m.: Rs. 9,000 crore for Swachch Bharat Abhiyan.

11.25 a.m.: 5,542 villages have been electrified, more than the last three years combined.

11.24 a.m.: Rs. 38,500 crore for MNREGA. Highest ever for the rural employment scheme.

11.23 a.m.: Rs. 2.87 lakh crore for gram panchayats as per recommendation of 14th finance commission.

11.22 a.m.: Four schemes for animal welfare.

11.19 a.m.: Agricultural credit target of Rs. 9 lakh crore. Govt to allocate Rs 5,500 crore for crop insurance scheme.

11.19 a.m.: Unified e-platform for farmers to be inaugurated on Ambedkar’s birthday.

11.17 a.m.: Paramparagat Krishi Vikas Yojana to bring 5 lakh acres under organic farming.

11.14 a.m.: 28.5 lakh hectares to be brought under irrigation.

11.13 a.m.: Govt will reorganise agricultural policy to double farmer income in five years.

11.11 a.m.: Jaitley announces the nine pillars of his Budget — Agriculture and farmers’ welfare, rural sector, social sector including healthcare, education, skills and job creation, infrastructure, financial sector reforms, ease of doing business, fiscal discipline, tax reforms to reduce compliance burden.

11.11 a.m.: New scheme for BPL families for gas connections. Staturtory backing for Aadhaar platform to ensure delivery of benefits.

11.10 a.m.: CAD is 1.4% of GDP.

11.10 a.m.: FY 16-17 will have the additional burden of implementing the VII pay commission and the defence OROP.

11.08 a.m.: FY 15-16 and 16-17 will be challenging for the government.

11.07 a.m.: Forex reserves are at the highest ever levels — $350 billion.

11.05 a.m.: GDP growth has accelerated to 7.6%. CPI inflation has come down to 5.4%.

11.05 a.m.: Mr. Jaitley says the Indian economy has held strong despite a global slowdown.

11 a.m.: Arun Jaitley rises to present the Budget.

10:46 am: Mr. Jaitley’s Budget speech to begin in 15 minutes.

10:43 am: Union Cabinet clears General Budget for 2016-17.

10:29 am: Cabinet meeting in Parliament ends.

10:05 am: The Sensex falls 59 points in early trade on reduced bets by cautious retail investors amid continued capital outflows by foreign funds ahead of the Budget. More…

9:53 am: Pre-Budget Cabinet meet to begin shortly.

9:40 am: Mr. Jaitley, MoS Jayant Sinha arrive in Parliament.

9:19 am: The stock markets don’t seem very enthused ahead of the Budget — Sensex opens 38.86 points lower, currently at 23,115.44.

9:10 am: The Budget may be given a dash of green with many environment-friendly measures to reduce the carbon footprint, official sources tell The Hindu. The budget is likely to provide incentives to encourage local manufacture and Research & Development (R&D) of electric vehicle components, including lithium-iron batteries.

9:00 am: About 8.5 crore employees whose retirement savings are managed by the Employees’ Provident Fund Organisation (EPFO) could get an option to transfer over a third of their EPF contributions to the National Pension System, regulated by the Pension Fund Regulatory and Development Authority or PFRDA. Read more…

8:54 am: How well do you know your budget history? Here are 11 landmark Union Budgets that you should know about.

8:45 am: Here’s a ready reckoner for some of the terms that will be a part of Mr. Jaitley’s long speech, that some of us may not be familiar with.

8:30 am: How long will this year’s Budget speech be? Which Finance Minister holds the dubious honour of presenting the longest budget speech, in terms of word count? Here’s a clue: it was an 18,650-word speech given 25 years ago!

8:00 am: Budgets are about numbers and best understood using charts and graphics. In case you missed it, here are the highlights of the previous Budget, captured in eight interactive charts.

7:30 am: The event provides us an opportunity to reflect on the proposals and promises that were made during last year’s Budget. We looked at some of them and checked the status of their implementation. Here’s what we found.

7:00 am: Here’s some interesting information. For Budget 2016-17, the government invited suggestions from citizens through Twitter for the first time, even conducting a series of polls to gauge public priorities and expectations from the Budget.
Source: The Hindu

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1. The FM’s priority in the 2016-17 budget will be higher growth, with fiscal rectitude, we believe. With the private sector capex yet to pick up, he will budget for higher plan capital expenditure (investments), in addition to the higher spends on OROP and 7th Pay Commission, which need to be factored in. These will be proposed to be financed by higher revenues from divestment/privatisation, higher indirect tax rates, telecom auctions and better tax compliance, apart from a cut in non-plan expenditure (subsidies) via DBT.
2. A lower fiscal deficit will leave more money available for the private sector, help in easing inflation, and moderate interest rates further. We expect targets under the FRBM Act to be largely maintained. We expect the FM to target a fiscal deficit of 3.7% for FY17 and budget for a gradual reduction in fiscal deficit per annum to 2.5% by FY19.
3. Expect FM Arun Jaitley to target real GDP growth of 7.7% in FY17 and bring it to over 8% next year. Larger and targeted plan expenditure capital outlays, with strict implementation timelines, would likely be announced, to ensure economic recovery and sustainable growth. We expect plan expenditure target to increase by 30% over FY16RE.

4. The budget will aim to provide an investment – led supply aid to growth (with private sector participation via Make in India campaign) as well as a consumption – led demand pull growth via 7th Pay Commission, OROP and DBT of subsidies.
5. On taxation front, we expect the Government to initiate reform process in direct taxes, in line with the announcements of the previous budget. The tax rate is expected to gradually come down from 30% to 25%, with a corresponding removal of exemptions / deductions available currently. On indirect taxes, we expect increase in service tax rate to bring it in line with the proposed GST rate of about 17-18%. Similarly, excise duties will likely be levied on various exempt items and increased for various items which are currently taxed at concessional rates. We are not expecting change in base rate of excise duty.

6. FM Arun Jaitley will have to restrict non plan expenditure to meet his FD targets. While the food subsidy burden will be taken up, we believe the FM will budget for lower fuel subsidy bill on the back of lower crude prices. He will also better target subsidies through the JAM trinity. The government has already announced on January 1, the launch of DBT for kerosene subsidy in a bid to cut down the diversion and black marketing of the fuel. The kerosene subsidy in FY15 was pegged at about Rs.248bn. As per reports, Direct Benefit Transfer (DBT) for LPG had resulted in savings of about Rs.140bn in FY15. We expect DBT to be gradually used for more subsidies. Implementation of DBT for fertilizer and crop subsidy could result in substantial savings.
7. To provide higher employment opportunities and to make the workforce employable, we expect measures to promote the ‘Make in India’ and ‘Skill India’ initiative. We also expect higher allocations towards agriculture and rural sector to support rural growth, after two continuous drought years in the country.

8. We expect the divestment target to be increased to Rs 500bn in FY17 v/s the FY16RE of Rs.200bn. Tax revenue targets (net) may be set at Rs.10.2trn, an 8% growth over FY16RE. Customs duty may be tweaked on several items to further the ‘Make in India’ cause. We expect implementation of GAAR to be postponed to FY18. We also expect tax benefits for the export-oriented sectors, in view of the consistently falling exports and some measures to restrict dumping.

9. SENSEX AND NIFTY TODAY: The 30-share index on Thursday opened 154.60 points up at 23,536.47 on account of firm global markets.

10. We believe that, the budget may have the following implications for the sectors: BUDGET IMPACT POSITIVE: Sectors – Auto, Banking/NBFCs, Capital Goods, Cement, Construction, Metals & Mining, Oil & Gas, Paints, Power, Shipping & Logistics. BUDGET IMPACT NEUTRAL: Sectors – Agro Chemicals, Aviation, FMCG, Information Technology, Media, Pharmaceuticals, Real Estate.

PTI Via financialexpress

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To shore up its revenues in order to spend more, the government may increase service tax to 16 percent from the current 14 percent, a move that would make many services costlier, according to a report by business news channel CNBC-TV18.

“In addition to the Swachh Bharat Cess of 0.5 percent already levied, sources say the service tax rate is projected to rise by 2 percent to 16 percent,” the channel reported.

If the government does raise the service tax rate, one would have to pay higher for restaurant bills, air tickets, mobile phones, to name a few, as the tax is collected from the end user.

The Swachh Bharat cess of 0.5 percent was levied with effect from 15 November, 2015, on all services that attract service tax.

The government is hard pressed to shore up its revenues for a probable hike in social welfare spending in view of the upcoming state assembly polls in Kerala, Puducherry, West Bengal, Tamil Nadu and Assam, which are crucial for the ruling BJP at the Centre to increase its tally in the Rajya Sabha.

On Wednesday, the government estimated a shortfall of about Rs 40,000 crore in direct tax collections, though it said that the same would be managed by a rise in indirect tax collections. The total taxes collected stood at Rs 10.66 lakh crore, 73.5 percent of the budgeted estimates of Rs 14.49 lakh crore for FY2016, it said in a statement.

The government has utilised the fall in crude oil prices to raise excise duty on petrol and diesel during the past three months to mop up an additional Rs 17,000 crore during the current fiscal.

The Union Budget for FY2016-2017 will be presented by union Finance Minister Arun Jaitley on Feb. 29, 2016. The budget session of Parliament commences on Feb. 23, 2016.

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