While turning Santa for low income groups and farmers in the Union Budge 2016-17, Finance Minister Arun Jaitley has increased indirect taxes thus putting additional financial burden on the middle class and consumers in general.
The extent of the burden depends on what the individual consumer would buy, both in terms of goods and services.
According to experts, the indirect taxes would put an additional burden of Rs. 20,600 crore on consumers in the coming financial year.
As per the budget proposals prices of tobacco products including cigarettes will go up due to increase in excise duties on tobacco products other than beedi from 10 to 15 per cent.
Power tariff may also go up as the government has increased levy of ‘Clean Environmental Cess’ on coal, lignite and peat from Rs. 200 per tonne to Rs. 400 per tonne.
Luxury cars, small cars, SUVs will cost more due to levy of infrastructure cess @1 per cent on petrol and 2.5 to 4 per cent on diesel cars.
Buying of high end cars of more than 10 lakhs will become more expensive.
Though the finance minister has not increased the service tax rate which is at 14.5 per cent in 2015-16 as compared to 12.36 per cent last year, he has introduced few cesses such as Krishi Kalyan Cess 0.5 per cent on all taxable services. This will make eating out expensive as the service tax will now be levied at 15 per cent from June onwards.
Riyaaz Amlani, President, National Restaurant Association of India (NRAI) said his industry will be impacted by the increase of service tax.
Besides, consumers will have to pay more towards, telephone bills, air tickets, insurance premium and buying property to name a few.
“The introduction of new cesses in addition to those introduced in the previous year, run contrary to that expectation and appears regressive,” said Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP.
In line with the Make In India initiative, the finance minister has made changes in customs and excise duty rates on certain inputs to reduce costs and improve competitiveness of some domestic industries which include Information technology, hardware, capital goods and defence production.
Dinesh Agrawal, Executive Director, Khaitan & Co on Indirect Tax said “Jewellery, and branded garments will be subjected to Central Excise Duty of 1 per cent and 2 per cent respectively (without availing CENVAT Credit). Past efforts to levy duty on these goods didn’t succeed.”
Commenting on this matter Praveenshankar Pandya, Chairman, Gem & Jewellery Export Promotion Council said “We are apprehensive of the introduction of excise duty on jewellery products for the first time in several decades. In India, jewellery is largely produced by the SMEs and they are not equipped to follow the rigid compliance of excise norms. The imposition of excise would severely impact jewellery production in India resulting in loss of employment to the uneducated but skilled jewellery workers.”
Some analysts said the government should have abolished the Swacch Bharat cess to accommodate the new cess.
According analysts at BMR Advisors items those will be expensive include readymade garments having retail sales price of more than Rs 1000, jewellery, soft drink and all services. The products that will be cheaper include solar lamps and footwear. Treatment of kidney ailment will be cheaper.
