Interpreting The Union Budget 2016-17

In keeping with the buzz of the Union Budget that has consumed the majority of the last week, RCB invited two relevant experts to decode the same for the Club Meeting. Rtn. PP Dadi Engineer, eminent Solicitor and Advocate and Sr. Partner with Crawford Bayley& Company, Solicitors and Advocates, and among other subjects, is a specialist in Indirect Taxation, shared his interpretation, with his signature quips, of the indirect tax implications of the Union Budget 2016-17. Our other eminent speaker, Mr. Firoze Andhyarujina, leading senior council of The Bombay High Court and the Supreme Court of India, boasts of a distinguished career where he specializes in Income Tax and other laws.

He spoke on the direct tax implications of the Union Budget. Kicking off the talk in his typical regaling fashion, Rtn. PP Dadi Engineer explained the difference between direct and indirect taxation via a joke based on a couple, with the husband explaining to the wife the difference between Direct and Indirect Taxation, “It’s like this, darling. When you ask me for money for your dresses, shoes, cosmetics et al, that’s Direct Page 2: An Egyptian Invite from RCof Alexandria Cosmopolitan Page 3: RCB & RCN Facilitate Endurothon World Record Pages 4&5 : Interpreting The Union Budget 2016-17 Page 6: Cricket: BY Boys Beat President’s XI by 5 Wickets! Page 7: In Camera’s New Heritage Walk To Explore ‘Fort’ •• March 8, 2016 Club Assembly at DCB, Raheja Centre at 5:30pm •• March 22, 2016 District Governor’s Visit •• March 29, 2016 Javed Ali Fund Raiser, Bhabha Auditorium. •• March 24, 2016 Holi Fellowship at Rtn. Naresh Kumar Jain’s residence, Khar •• March 29, 2016 Fund Raiser with Javed Ali at NCPA Taxation. But when you remove money from my wallet while I’m asleep, that’s Indirect Taxation!”

More clearly, Rtn. PP Dadi Engineer helped understand the difference as Direct tax was that levied on the individual, like Income Tax, and Indirect Tax was that levied on goods and services. “Every budget has a backdrop – in terms of circumstances and economic scenarios. For this financial year, the government began with the exercise of tempering down 7.2-7.3% in financial growth, as opposed to their aim of achieving a growth rate of 8-8.5%. The renowned economist John Maynard Keynes said ‘Inflation is a form of taxation which any government can impose, without legislation’. Unfortunately, there is no clear roadmap given by the current government as regards how it would be controlled.” Speaking on the provisions of the Budget for Indirect Taxation, he explained, “As someone has wisely said first ‘Make India’, then Make in India'”, he quipped about the PM’s pet project. “Changes have been made in the Excise and Custom Duty rates on various imports or raw materials to reduce the costs and improve competitiveness of the domestic industry in sectors like IT, hardware, capital goods, defence production, textiles, etc.

However, the foreign investors are not very impressed and seem skeptical.” “There is a steep rise in excise duty on cigarettes. Amazingly, there is no talk of the Goods and Services Tax (GST). But generally, consumer items will get more expensive including beverages and jewelry. Be warned that inflation will rear its head soon and I hope the government will have a roadmap on how to deal with it. There’s a cess imposed at 1% on petrol-driven cars, 2.5% on dieseldriven cars, 4% on higher enginecapacity vehicles including SUVs. There is a new Krishi Kalyan Cess introduced which will be imposed on all taxable services for the purpose of financing and promoting activities to improve agricultural. The Budget per se, is an Agriculturist Budget – aimed towards the betterment of rural conditions – more of a pleaseall budget, focusing on Agriculture,” he concluded. The International Tax Review, World Tax 2006, rated Mr. Firoze Andhyarujina amongst the 5 leading individual Tax Counsels in India. He has participated in some of the important cases that have laid down and interpreted India’s tax laws. He took over to explain the Direct Tax implications of the Union Budget.

“I would sum up the Union Budget thus – In the Economic Survey given on the 26th of February, India was showcased as a shining and one of the best performing emerging economies globally. This Budget has failed to live up to the expectations and to bring India on the pedestal of dynamism required in a word economy. We must analyse this Budget from three perspectives. Firstly, the fall in the oil prices to below 30 USD a barrel, the lowest in the last 12 years. How have we utilized India’s savings of approximately Rs. 2.5 lakh crores and put it to productive use? Secondly we were to take advantage of China’s fall and leap forward, but we are staggering. And finally, the currency adjustments globally need to be taken into account so that our financial structure remains resilient and is cushioned against various contingencies that take place

In the financial world.” Sharing a few Budget highlights, he said, “A good provision of Presumptive Taxation has been extended, where a businessmen with turnovers upto Rs. 2 crore, can (after April 1, 2015) , under the basis of Presumptive Taxation, have no books of accounts, and pay 8% of the total turnover. From a tax planning point of view one could save greatly on taxes if one were to be paid not as an employee but as a professional, in keeping with Presumptive Taxation.” Speaking on the Dividend Distribution Tax, he said, “It’s wrong for the government to levy tax on organisations who have already paid tax on profits, to be taxed again on the distributable income or dividends (15%); and then yet again, a third time-over, 10% tax on dividends on shares and Equity linked schemes of Mutual Funds. This draconian policy is keeping foreign investments away!”

“Another disappointment is the government going back on its word with regard to expectations raised Rotarians Analysing the Budget The Panel at the Club Meeting about the corporate rate of taxation which were slated to be relaxed from 30% to 25% , to align it with the South East Asian Economies. In fact, no deductions have been given to corporates, barring companies with turnovers lesser than Rs. 5 crores.” “Also, an ‘Open Window Scheme’ or Amnesty Scheme has been introduced to make good domestic black money. This was earlier applicable to all assets and money outside India. However the definition of ‘undisclosed income and assets’ needs to be ascertained as there’s conflicting definitions on this issue, with its earlier definition laid out by the Income Tax Act under the Block Assessment Scheme.”

“Sovereign Gold Bonds are the only points on which benefit of Capital Gains has been granted”. He explained the new provisions on the IT penalty, saying that penalty would be levied for under-matching (50%) and mismatching (150%). “One good news is we need not visit tax office for our cases anymore and we can do it via e-assessment. Hence there is no direct interface with the officer, ensuring there is no scope for any immoral situations arising.” “On the whole I think the budget has not given the correct guidelines for the boost required in the economy and to carry India to greater heights in the times to come,” he concluded.