Indian Merchants’ Chamber

Discussion on Amendments proposed in Finance Bill 2013

21 March 2013

The number game

Budget 2013–2014— Thought sharing by EYPage 3

Macro assumptions

► GDP Growth at 6.1% - 6.7%► Nominal GDP Growth at 13.4%► Assumed inflation rate at 7% if real GDP growth is about

6.4%

Budget 2013–2014— Thought sharing by EYPage 4

Non Plan Expenditure / Subsidies

Expenditure(1)

BE 2012-13(2)

RE 2012-13(3)

BE 2013-14(4)

% change in (4) over (3)

Non Plan 969900 1001638 1109975 10.8

Plan 521025 429187 555322 29.4

TOTAL 1490925 1430825 1665297 16.4

Major Subsidies (2)

RE 2012-13(3)

BE 2013-14(4)

% change in (4) over (3)

Food 85000 90000 5.9

Fertilisers 65974 65972 0

Petroleum 96880 65000 (33.0)

TOTAL 247854 220972 (10.8)

Rs crores

Budget 2013–2014— Thought sharing by EYPage 5

Revenue

Revenue RE 2012-13 BE 2013-14 % change

Gross Tax Revenue 1038037 1235870 19.1%

Non tax Revenue 129713 172252 32.8%

Total Revenue Receipts 8718276 1056331 21.2%

Corporate Tax 333417 376782 13%

Surcharge 15004 30519 103%

Education Cess 10453 12219 16.9%

Taxes on income 193932 229502 18.3%

Surcharge - 4400 -

Education Cess 5998 7017 17%

Customs 164853 187308 13.6%

Excise 171996 197554 14.9%

Service Tax 132697 180141 35.8%

Rs crores

Budget 2013–2014— Thought sharing by EYPage 6

Implied tax buoyancies

# Type of taxFY14 Tax buoyancy (% change

in tax revenue/ % change in GDP at market prices)

1 Gross Tax Revenue 1.48

2 Corporation Tax 1.26

3T axes on Income other than Corporation Tax 1.53

4 Customs 1.02

5 Union Excise duties 1.11

6 Service Tax 2.67

Overall expenditure increase of 16.4% is being financed by assuming a nominal growth of 13.4% and a buoyancy of nearly 1.5 in gross tax revenues. This seems unrealistic.

This buoyancy was 0.93 in FY12 and 1.3 with respect to RE in FY13.

Reaction to the Budget:

EY – ET Budget Poll

Budget 2013–2014— Thought sharing by EYPage 8

EY – ET Budget Poll

Majority of the respondents agreed that:► More was expected from the Budget in terms of

► Clear road map on GST► Clarification on indirect transfer► Guidelines on step taken to implement the Shome committee reports on

GAAR and Indirect transfer ► 60% of the respondents felt that foreign investors had no cause for

cheer with the Budget provisions► On the policy front, the Budget lacked incentives to attract foreign

investments which could impact growth► While the FM has kept the indirect tax rates steady and sought to

regularize the property market, increase in surcharge rates and ambiguity on TRC have not gone down well.