Before I start with few critical areas of the budget to be analyzed and projection about the same all I can say about the budget being economist and business strategist that government is laying down the path for the new decade through its allocation in the budget. There are many hidden lines which one need to understand the path of the Budget towards the new decade.
One of the important things that I could make out from the budget about taxation aspect was the AI, faceless modes of tax scrutiny and other process are going to come up aggressively. Many notices will come to individual as well as corporate –both direct and indirect taxes as the government are hungry for revenue. Tax scrutiny will rise like anything and that is why advanced technology is being adopted to identify the gaps in the documents filed by the taxpayer as well as reducing the harassment from the hands of the corrupt tax officials linked with other professions. Don’t be surprised if you get 5 years old or 7 years old tax enquiry and scrutiny –both direct and indirect taxes. Fiscal slippage management process has just begun.
Yesterday the budget announced that disinvestment target of Rs2.1 lakh cr. based on primary on IDBI stake sale, Bharat Petroleum Corporation Ltd, Container Corporations of India and Shipping Corporation of India and LIC. Well I am not sure about all the companies neither I doubt them but on two companies I have a question. My question is who will buy IDBI and LIC. What logic one should give to buy LIC which hold significant risk and unknown papers hidden under its womb just like Lehman Brothers? IDBI-would you be interested to buy but before you buy please tell the logic behind the same.
As being an economist I projected calculation of 3.6% to 3.8% of Fiscal slippage dressed by the government the next financial year Fiscal projection of 3.5% is very hard to be achieved. The government is betting the number of 3.5% on IDBI and LIC stake sale which seems like the story of Alice in Wonderland. Further, the government is betting on GST numbers where in the last 2 to 3 month around Rs 1lakh corer revenue have been generated. This is being taken as a fixed number of revenue to happen every month is a big mistake. Well, I am sorry to say that this number is not going to sustain and the best answerer lies with my fellow business and trade people.
Disinvestment target for the FY-20 was around Rs.65000 cr if I am not mistaken. But the real achievement has been only Rs around 18000cr. Now this time they have made ambitious target hopeful of meeting the new target of Rs 2.1 lakh crore in the next financial year, which is double that of the current fiscal year, despite disinvestment proceeds for the current year languishing at Rs 18,094 crore.
The government has made one thing very clear that they are ready to breach the fiscal slippage beyond 3.8% also under the “Escape Clause”. The government has utilized ‘escape clause’ under the Fiscal Responsibility and Budget Management (FRBM) Act which provides it leeway for relaxation of fiscal deficit roadmap during the time of stress. Hence we need to ready for 4% Fiscal slippage in the coming year.
Another interesting and the one which kept most of the people or analyst of the budget busy was the new Direct tax Slabs were given where there has been a significant uproar that the framework of the new slab is useless and why and the government came up with such a dull new slab. The exemption was not applicable and not much benefit to an individual. Being an economist and having and economic eye on the subject all it can be said that government have created a new era for the Direct Tax segment keeping a critical part of the taxpayers.
Well, the new framework might sound like foolish but form a personal front it has the potential to create consumption and avoid investing for Tax savings to block the money. It has been found that many people skip consumption just for investing to save taxes. Rather the same fund could be used to invest in some productive asset or spend it at own discretion.
Just for tax saving one has to keep aside a significant some and simultaneously cut down on other expenses. This cut-down and non-ability to meet exemptions often lead to paying off high taxes. People at ground level have to struggle to get benefits of exemption and this also creates an impact on consumption. One might be ready to pay high taxes but may not like to get funds blocked for deductions. This might sound like lunatic but real-life story has a different story to tell.
As the Finance Minister said that in the coming year in this decade they will bring down provisions part, all it could be made out that the salary slips need to be changed radically keeping in mind the new direct tax slabs. Today this new slab has the option to choose, but tomorrow it may not have. Tweaking will be included but those tweaking are subject to future risk of abolishment.