By proposing a duty reduction in capital goods from 25 percent
to 15 percent, Finance Minister Yashwant Sinha, has given a boost to
manufacturing in the country. IT manufacturers should be pleased with this
development since it rectifies the inverted tariff structure that was prevalent
so far.
The other measure that should improve the confidence of
manufacturers is the postponement of the implementation of WTO agreement to 2005
instead of 2003. The IT sector being the only one to face zero duty regime,
required sufficient time to upscale itself to face the new situation.
In the software sector, though the 10 percent tax on software
export earnings has come as a dampener, the FM says that the measure is meant
for only 2002-03 to ensure everybody contributes towards national security. The
increase in the foreign firm acquisition limit to $ 100 million through the
automatic route, has opened the door for Indian software companies to go
international.
When it comes to budgetary measures for the salaried, the FM has
almost busted this class of taxpayers! With the Sec 88 deduction reduced to nil
for those who earn above Rs 5 lakh and only 10 percent for those who earn
between Rs 1.5 Lakh to Rs 5 lakh, the FM has removed any incentive left for
saving.
Several perks of the salaried individuals was already within the
tax dragnet since last year. For instance, leave travel allowance was not
taxable if bills were provided for the expenses. Now, only the travel expenses
remain non-taxable. Therefore this class of population has to work four months
of the year for the benefit of the government and rest of the time to sustain
itself!
The Finance Minister should not get wrong the angry sentiments
of the salaried. This class indeed wants to pay taxes. It realizes fully well
that those who earn more need to contribute more to the security and the upkeep
of the nation. But how much more should the salaried pay?
And after paying almost four month’s salary as tax, what does
the salaried class get in return from the government? Very little indeed. To get
a passport, it takes more than three months. The project of supplying photo
identity cards to voters was taken up several years ago and yet remains
incomplete.
The roads of the nation are in pathetic condition. Yes, the
budget has recognized the bad state of roads and has provided for some funds.
But this is too little coming too late. Also, whenever new roads and bridges are
built, toll is charged as a routine. So where does the tax money get utilized?
What the government should do is stop squeezing the salaried
more and take drastic and innovative measures to ensure that greater number of
people pay taxes. Why target only this class and let 98 percent of the
population go tax-free?