Finance Budget to be "adorned" with new Taxes in 2013

Why the Need of New Taxes by the Indian Government

It is a known fact the rising fiscal deficit remains a major concern for the Indian economy. Thus it is very important that  revenue for the government is increased to some extent to help bring down the deficit to the comfort zone. In order to help the revenue generate, it is very obvious that the government will soon come up with new taxes. Looking at the global economic condition, where all eyes are on the performance of emerging economies like India, China, etc., it is very important that the government achieve the deficit target of 4.8 % along with a GDP growth of nearly 7% for FY14. This herculean task before 2014, will also help the government in the general elections which is due in 2014. Thus the budget 2013 is the right time to hammer the common people with new taxation policy to increase revenue generation.

While there may be only an incremental tax levied on the super-rich, the widening of various taxes to include services and categories hitherto ignored and the enactment of the GST Bill in Parliament were the most likely proposals to be included in Budget-2013. It is a known fact that all over the world, the level of tax has been raised by the government and several new taxes have been introduced especially for the super rich category of individuals. India is no different in this regard and the same is likely to happen in the upcoming Budget 2013. The Parthasarathi Shome – P Chidambaram team in North Block will certainly introduce new taxes.

Read on GWI Basic Knowledge of Indian Income Tax, Terms & Definitions.

Types of the Taxes & Scope

1) Service Tax –  Service tax is on cards to help government cope up with the rising debt and deficit. It is expected that certain services which were outside the tax brackets until now, would be included within the service tax bracket.  Inclusion of infrastructure in the service tax net is also one of the key areas being focused. Also a further increase in service tax is likely to be implemented. 

2) Inheritance Tax – Regarding the inheritance tax, the past experience has shown that the estate duty really did not generate too much of revenue. Also it was reported that the cost of administering the estate duty stood higher than the actual revenue collected in quite a few cases. Thus it is likely that there would not be any introduction of inheritance tax.

3) Gift Tax – There is possibility of government imposing a tax for the super rich. Widening of the Gift Tax Act as seen in the budget 2012, is likely to continue in the forthcoming budget as well.

4) Goods and Services Tax – If we see at the current tax rate, we find that there is a gap between the median rate of the Goods and Services Tax and the actual service tax levied. The previous budget presented by the then finance minster Pranab Mukherjee, saw an increase in service tax from 10% to 12%. The step was towards the median rate and therefore there was a raise in the rate of service tax. Introduction of the Goods and Services Tax is not likely to happen sometime soon. Though, if the constitutional amendment bill is passed without much opposition, there is a possibility that the goods and service tax will be enacted in the coming budget.

5) Income Tax – As far as the income tax bracket is concerned, the current rate of 30% for the high income people is achieved after a considerable length of time.

6) Wealth Tax – According to some recommendations made by several committees there is a suggestion of widening the wealth tax along with the service tax.

Thus the budget 2013 is all set to see some new tax policies soon.

Read on GWI India’s New Direct Tax Code Analysis – Nothing New about It.