As compared to Budget 2012-13, which ushered various changes in the area of indirect taxes like the introduction of the Negative list regime in service tax, Budget 2013-14 has not seen any major reforms in the tax structure. The basic rates of customs, excise and service tax have not been tinkered with nor has there been any significant addition to the tax base.
One key feature of the Budget seems to be the intent of the Finance Minister to increase tax on the consumption of luxury items and services such as high-end housing and air-conditioned restaurants. This is clearly evident from the increase in the basic customs duty on import of luxury cars, motorcycles with engine capacity of 800cc and above, and yachts along with an increase in the excise duty rate on manufacture of SUVs (except SUVs used as taxis). Similarly, the enhancement of excise duty on mobile phones costing more than Rs 2000 would also make these products dearer.
In the area of real estate, the Budget announced an incremental service tax on housing priced at more than Rs 1 crore or when the carpet area is above 2,000 square feet. Further, an increase in excise duty on marble may also have an indirect incremental cost on real estate.
The Finance Minister has also introduced various administrative amendments in the Budget.
The introduction of a one-time amnesty scheme in service tax should be welcomed by the industry. On the other hand, the provision restricting the operation of a stay by the Tribunal only for 365 days with an automatic vacation post such a period may lead to coercive recovery proceedings. This action is likely to be challenged before the Courts as in the case of a recent circular intended for immediate recovery of dues even during pendency of appellate proceedings.
All in all, the Budget appears to be a populist one keeping in view the forthcoming elections.
(Jayanta Kalita, senior tax professional - tax and regulatory services at Ernst & Young. The views expressed here are personal)