Budget 2012: Rate of service tax and excise duty should be retained
Rajdeep Endow, Managing Director, Sapient India and Global Delivery Lead.
Recommendations on direct taxes
In view of the fact that the present Budget is expected to be intermediate in nature, insofar as it would pave the way forward for DTC, it will be commendable if CTR in FY 2012-13 is brought down at least to match the proposed rate of flat 30 percent in the DTC.
When the industry was expecting a roll back in MAT levy in the last Union Budget, there was in fact a net increase of 0.08 percent in the MAT rate. This year, it should be kept steady.
Also, MAT should be rationalized, and it should not exceed 50 percent of the basic corporate tax rate. Increase in MAT negatively hits the cash flow of companies liable to pay taxes under MAT as there is financial loss on account of time value of money. With the difference between the corporate tax and MAT now getting narrower, new entrepreneurs and startups are bound to find it all the more difficult to compete against established businesses.
In the last Budget, units operating in SEZs were brought within the ambit of MAT. FM should re-consider the change and relieve SEZ units from MAT provisions in this Budget.
At present, there is no express provision enabling availability of MAT credit of Transferor Company to Transferee Company in case of an amalgamation. Section 115JB should be amended to allow such carry forward.
Stipulation to Section 206AA (requirement of furnishing PAN) should be introduced. To the effect that this Section shall not be applicable in respect of persons who are not required to obtain PAN u/sec 139A.
In the case of indirect taxes
Retain the rate of service tax and excise duty. The rollback of the stimulus both in excise as well as service tax rates should not been tinkered with, and they should be maintained at 10 percent.
Simplification of service tax refunds: The FM should consider the need to streamline the administrative process around efficient delivery of refunds to exporters of services. We anticipate that procedure for simplified and speedy refund of CENVAT credit will be announced in this Budget.
There should be no concept of double taxation. Clarification is needed with respect to transaction that attracts both service tax and VAT on the same consideration. An amendment is required which should exclude from service tax such value which has already been subject to VAT/CST.
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