Signs of a rift within the Bharatiya Janata Party (BJP) have started appearing over the issue of seeking amendments to the Finance Bill. While the party brass favours the passage of only those provisions which will not require a roll-back in the revenue receipts already collected, such as Customs, excise and surcharge on excise duty, another faction, which is strongly opposed to this view, has emerged.
According to this section, the BJP should not oppose other budgetary provisions, such as those on direct taxes. Since the United Front government has already reduced tax rates substantially, this section feels that any new incoming government will find it difficult to improve on the announcements already made, particularly if a mid-term poll becomes inevitable.
For instance, although peak customs duty continues to be 40 per cent, Union finance minister P Chidambaram has globalised average tariff rates by bringing them down to 30 per cent. This provision goes against the swadeshi plank of the BJP, but has been well received by foreign investors.
Similarly, the maximum slab on personal taxes has been brought down to 30 per cent, which is considered to be comparable with any of the neighbouring Asian countries. The salaried class has also reaped a bonanza through a leap in standard deduction, besides a 5-10 per cent across-the-board cut in marginal rates.
The budget has also raised the upper rate of the middle slab, which means that a person who earns Rs 1.7 lakh per annum will now have to pay tax amounting to just Rs 20,000, against the earlier amount of Rs 35,000.
BJP sources point out that any incoming government is likely to find it difficult to go back on other budget pronouncements such as abolition of surcharge, modification of the minimum alternate tax and the abolition of double taxation on dividends. All these provisions are extremely popular with the corporate sector, leading to fears within some sections of the BJP that any opposition by the party to these provisions could backfire politically.
The BJP high command has set up a committee consisting of Murli Manohar Joshi, Satish Agrawal and Sunderlal Patwa to examine the budget provisions. Both Joshi and Agrawal are also members of the Parliamentary standing committee on finance.
There are reports that the BJP may press for higher customs duty to reinforce its swadeshi plank, besides pressing for further increase in the standard deductions to benefit the lower segment of tax payers.
