Tax reforms fail to please

CHAMBER MOOD

Cheers for corporate tax cut, service tax status quo.

The mood at both the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce & Industry (Ficci) was one of expectation and impatience as Finance Minister P Chidambaram rose to present his fourth Budget.

At CII, while Chidambaram talked about the government's efforts to maximise benefits for the rural sector, captains of industry murmured approvingly.

The announcement that the government will upgrade the Indian Institute of Science (IISC) in Bangalore to a world-class institution drew loud approval at Rahul Bajaj's table.

CII's chief mentor Tarun Das sitting out front looked pleased with himself as the finance minister announced the Skills Development Initiative, an idea mooted by the CII to provide vocational training.

The excitement mounted when the finance minister came to service taxes. A collective sigh of relief went up as he said service tax will remain at 10 per cent.

The corporate tax reduction from 35 to 30 per cent could have gone down better without the contravening reduction in depreciation rates from 25 to 15 per cent, Bajaj and others seemed to feel.

The CII audience was as stumped as the MPs in Parliament when the surcharge on withdrawals above Rs 10,000 was announced.

Deepak Puri of Moser Bear India was heard asking, "What about flight tickets?" Rajiv Memani of Ernst & Young suggested that it could be a bargaining ploy to bring down the Rs 50,000 limit for mentioning PAN numbers to about Rs 20,000.

At Ficci, even before the speech had begun, there were murmurs like "corporate tax will be reduced" and "service tax net will change". Tax reforms seemed topmost on the minds of members like Saroj Poddar, K K Modi, Sunil Alagh and K P Singh.

Most of them were visibly disinterested in the sops the finance minister was announcing for the social sector. It was only when he started talking about the textile sector that one could see smiling faces of O P Lohia and Ravi Jhunjhunwala.

It was the tax proposals which created a stir. The members clapped as the corporate tax reduction was announced. But the approval evaporated as Chidambaram added the 10 per cent surcharge clause. Harshpati Singhania of JK Paper was quick to add that it might not give any benefit to the corporates.

As the finance minister wound up his speech, it became apparent that he had not much to offer in terms of tax reforms. "There is very little on the tax reforms which is makes this Budget insignificant. We will wait for the papers he will submit later," K P Singh said.