Budget to focus on farm, infra sectors

With the economy cruising along, Budget 2006 is expected to give a big push to agriculture and infrastructure while carrying forward indirect tax reforms, laying down a roadmap for goods and services tax (GST), simplifying the fringe benefit tax (FBT) and cutting deficits.

As five states go for assembly polls in May, the budget, to be presented on Tuesday, is unlikely to have hard reforms like cutting subsidies as Prime Minister Manmohan Singh is understood to have given a directive to hold the price line as it hits the common man the most.

While there may not be any reduction in income and corporate tax rates, the salaried class is expected to breathe easy as FBT is likely to be modified or India Inc provided an option to pay a flat rate.

Both Prime Minister and Finance Minister P Chidambaram have already stated that customs duties would be brought down to the Asean level of 8-9% peak duty. It is to be seen if Chidambaram will reduce the present peak customs duty of 15% in one go or in phases.

Around a dozen services are likely to be added to the list of 81 taxable services as the sector contributes to around 52% of GDP. The tax has recorded a buoyant growth of 66% this year, and would far exceed the target of Rs 17,500 crore.

Employment generating sectors like textiles, leather, food processing and auto components may get fiscal incentives in the budget.