Braving a loss of INR one lakh crore in revenue, the
increase of income tax exemption threshold to INR 12 lakh is considered as a
calculative step towards preventing the consumption downslide that has
virtually proved to be a bane for the manufacturing sector in the country. The
calculation behind the move is that more money in the hands of the tax-payers
will pave the way for raising demands which in turn will help the country to
achieve an impressive growth rate in the next fiscal, overcoming the setback
expected to suffer in the ongoing fiscal. Besides, the higher exemption limit
is expected to increase higher compliances and less tax leakages, which in all certainty
will make the Indian economy healthy. The step can also be marked as a
departure from the practice of investing in infrastructure even by borrowing
disproportionately to provide much needed boost to the country's economy by
attracting private investments. It may also be stated that after a considerably
long gap, the Union budget has offered something substantial to the middle
class by offering tax sops, thus negating the criticism that the present day
government is only concerned about the rich. Thus the budget may loosely be
termed as a feel good one as it has lessened the burden of direct taxes to a
large extent.
But a close scrutiny of the budget figures are indicative of
the fact that only by easing the burden of direct taxes, the country’s economy
will not be able to achieve a faster growth rate. A similar exercise should
also be carried out in regard to indirect taxes too to provide proper relief to
the people. While the benefit of the rising tax exemption limit will help 1.5
million people, many more will be benefited if a realistic structure is adopted
in case of indirect taxes. It is a known fact that the middle and lower middle
class are responsible for the increase of tax revenues as in case of regressive
tax every citizen irrespective of their financial status has to pay at the same
rate. In order to bring a change in the situation, it would have been better if
the budget had proposed to restructure indirect taxes like slashing 18 per cent
GST from health insurance, bringing petrol and diesel to the GST list etc. Such
steps will have far reaching consequences on the country’s economy rather than
extending the exemption limit in direct taxes.
However, bringing too many changes in a single budget
sometimes may be counter-productive as witnessed earlier. Although the present
economic situation demands a change of thought and framework, Union Finance
Minister Nirmala Sitharaman should be complimented for exercising restraint,
instead of being too ambitious. It must be admitted that the Union Finance
Minister has tried to please all sections of the society without taking risks.
The opposition may criticise the budget as poll-oriented, the fact remains that
Ms. Sitharaman has tried to build trust in people to foster growth by strongly
remaining in the familiar path ignoring a vociferous demand of choosing a new
one.
