Budget 2015: Short Term Pain, Long Term Gain?

Published on Sat, Feb 28,2015 | 22:27, Updated at Sun, Mar 01 at 11:41Source : CNBC-TV18 | Watch Video :

Budget 2015 has made some sweeping changes to India's tax policy. Corporate tax rates will be lowered. Excise and service tax rates have been hiked. GST has been reaffirmed. GAAR has been deferred and the DTC has been junked. Is this a budget of short term pain and long term gain? CNBC TV18's Menaka Doshi speaks to well known tax counsel Dinesh Vyas, ELP's Rohan Shah, JSW's Vineet Agrawal & EY's Pranav Sayta.

CLEANING UP THE TAX CODE!
Proposal to reduce corporate tax from 30% to 25% over the next four years, starting from next financial year
Rationalisation and removal of various tax exemptions and incentives to reduce tax disputes and improve administration
No change in rate of personal income tax
Most provisions of Direct Taxes Code have already been included in the Income-tax Act, therefore, no great merit in going ahead with the Direct Taxes Code as it exists today

TAX INCREASES!
Wealth tax replaced by 2% cess on super rich. Cess to be levied on corporates as well. Effective Corporate tax increases to 34.6%
Central Excise Duty increased to 12.5%
Service Tax increased to 14%
Service Tax negative list pruned

PREPARING FOR GST!
Efforts on various fronts to implement GST from next year
Central Excise Duty increased to 12.5% (education cesses subsumed)
Service Tax increased to 14% (plus education cesses)
- Enabling provision to levy Swach Bharat cess of upto 2% on all services
Service Tax negative list pruned

INDIRECT TAX RELIEF!
All goods exempted from SAD
Inverted duty rate structures rectified
Time limit for taking CENVAT credit (inputs and input services) increased from 6 months to 1 year.

TAX RELIEF!
GAAR deferred by 2 years
AIF (Category 1 & 2) funds get pass through benefit
Tax clarity for REITs & InvITs (But MAT still applies!)
Foreign fund managers situated in India not considered PE
Tax on royalty/FTS rolled back to 10% (from 25%)

TAX RELIEF!
Clarity on Indirect Transfers: Substantial & value defined
Domestic transfer pricing threshold limit increased to Rs 20 cr
MAT rationalised for FIIs and members of an AOP.

TAX RELIEF!
Single member bench of ITAT can hear cases of upto Rs 15 lakhs
Penalty provision in indirect taxes are being rationalised
Tax Administration Reform Commission (TARC) recommendations to be appropriately implemented during the course of the year

FIGHTING BLACK MONEY!
New bill to deal with black money parked abroad
-          Evasion to be punished with upto 10 yrs jail time
-          Non-filing/inadequate disclosures to be punished with upto 7 yrs jail time
-          Undisclosed income to be taxed at maximum marginal rate
Benami Transactions (Prohibition) Bill to curb domestic black money

FIGHTING BLACK MONEY!
Electronic filing of statements by reporting entities
No cash advances of more than Rs 20000 in purchase of immovable property
PAN mandatory for any purchase or sale exceeding Rs 1 lakh