Interim Budget 2004-05
In anticipation of the forthcoming elections, the Finance Minister, Mr Jaswant Singh ("FM") today presented the Interim Budget, for a part of the fiscal year April 1, 2004 to March 31, 2005 ("Budget"). This interim budget would seek a "Vote-on-Account" to enable the Government to discharge its responsibilities and to meet its essential expenditure till such time as the next Government is elected. As no significant changes can be made in the fiscal policy, most of the changes proposed by the FM are in the form of promises and commitments, which the current Government would fulfill if it is elected as the ruling party for the upcoming term of 5 years.
The FM has nevertheless addressed the current issues related to taxation of BPO companies by referring to the recent circular issued in respect of outsourcing of call center activities, long-term capital gains tax exemption for investment in certain shares, introduction of tonnage tax and has also proposed a 50% reduction in stamp duty on certain transactions.
The approach to the Budget has shown the Government's continued commitment to the five basic concerns of Indian citizens, viz. enhanced employment and eradication of poverty; a second green revolution in agriculture; infrastructure development; fiscal consolidations; and greater manufacturing sector efficiency. The policies and reforms adopted also make it abundantly clear that the focus this year as well remains on preserving the strength of India's macroeconomic fundamentals.
Kicking off with the announcement of the current inflation rate between 4-4.5 % and an expected growth rate of the GDP between 7.5-8%, the FM has proposed the following main reforms:
It has been proposed to establish four global standard international convention centers, through private and public partnership, to be located in Delhi, Mumbai, Goa and Jaipur. In order to facilitate the effective functioning of the Jaipur airport, it is proposed to convert the domestic airport into an international one. With a view to augment the water scarcity in metropolitan cities it has been decided to initiate an accelerated drinking water supply scheme for those cities by accessing funds from the Government's Infrastructure Fund, the Life Insurance Corporation and other such funding sources.
Currently, stamp duty is levied on instruments evidencing almost every kind of transaction, which tends to increase the transaction cost considerably. This stamp duty is levied either by the Central Government or the State Government. As a first step towards rationalizing this stamp duty regime, it is proposed to reduce the stamp duty by 50% on all instruments on which stamp duty is imposed by the Central Government.
Before moving on to the tax reforms, it would be relevant to understand the impact of these proposals. Typically, the proposals made by the FM in his Budget speech, are tabled before both the houses of the Parliament for their approval, and then before the President for his consent. After receiving these approvals and making the necessary changes, the proposals become law and changes are effected in the relevant legislations. However, as discussed above, this year's Budget is simply an interim Budget. Since the Parliament will be dissolved in a few days, the current Government will no longer have the authority to legislate any proposals made by the FM. Accordingly, as stated by the FM, the Budget does not propose any changes to the legislations. Rather it simply discusses the reforms, which the Government commits to carry out at a later stage. Some of the relevant proposals are as under:
User-friendly tax administration measures
Certain measures were announced in order to facilitate the move towards an improved tax administration through greater application of IT with lower compliance costs. This is proposed to be carried out by introducing e-filing of excise returns, round the clock electronic filing of customs documents, etc.