The countdown for the Union Budget 2014 has started and the country is waiting for a systematic and unified tax system to be implemented as promised by Prime Minister Narendra Modi on various occasions, which in turn, will tune in both the micro and macro economic condition.
The tax system of our country is quite complex and is like a web of formalities for its people. Tax payers are somewhat optimistic as Arun Jaitley has rooted for an increase in the Income Tax exemption limit.
The government needs to focus on Direct Tax Code (DTC) and should implement the Goods and Services Tax (GST) regime which will make the overall system transparent, simple and accountable.
Goods and Services Tax
The GST is one of the biggest tax reforms which needs to be implemented as it will integrate the states' economies and will create a single, unified tax system for the overall boost and growth of the Indian Economy.
Arun Jaitley too is keen on rolling GST soon as it will change the growth story of our country. With GST, a transparent and corruption-free tax administration will be built. The tax burden will be divided and the existing taxes such as central sales tax, stamp duty, octroi, entry tax, tax on consumption and many such multi-layered taxes will be abolished that are existing currently.
Service tax goes in the government's revenue kitty. The present service tax rate is 12% plus 3%. People expect that the present service tax limit should be eased a tad as it effects their spending power. Also, it is expected that the government might remove some items from the negative list as provided in the earlier budget.
Custom and Excise Duties People are expecting relaxation in the custom duties. If we talk about jewellery, at present, duty free allowance with respect to jewellery is Rs 50,000 for a male passenger and Rs one lakh for a lady passenger. It is a general trend that custom duty is increased usually on luxurious cars, jewellery, consumer and electronic goods.
Income Tax / Section 80C Limit
India's tax system is lopsided with an estimated 4 lakh people paying over 60 percent of income tax collected in the country. It is expected that the limit for 80C will be raised from the existing Rs one lakh limit. This move will be welcomed with open arms if the limit is raised to at least 2-2.5 lakh, as this would mean increase in the spending power for the common man, which in turn would also accelerate growth and will also encourage savings too.
Corporate tax should be brought down to the average 25 percent from the 30 percent to regain the growth momentum.