The Hindu Business Line : Budget a mixed bag, say chambers

What they say
A disappointing Budget for the common man
First time introduction of export duty on iron ore and chromium to hurt exports
Allowing forex reserves for infrastructure development a revolutionary feature
FBT exemption for free samples and displayed welcome

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Kolkata Feb. 28 Chambers in Kolkata were unanimous in their view that the 2007-08 Union Budget provisions, while being on expected lines with a lot of focus on infrastructure and social security, has not been very clear on the "innovative, inflation-management approach" of the Government, arguably the need of the hour.

According to one chamber president, the Budget "is a mixed bag of cheers & jeers". While admitting that the Finance Minister, Mr P. Chidambaram, has done a fairly good job under the most challenging of circumstances, it is felt that for the aam aadmi, it has been somewhat disappointing.

Chambers are also not happy with measures like hike in dividend distribution tax, bringing ESOPs under the fringe benefit tax (FBT) and rentals on commercial properties under the service tax net.

According to Mr S. Radhakrishnan, President of Bengal Chamber of Commerce, one of the revolutionary features has been the allowing of foreign exchange reserves (said to be around $180 billion) for infrastructure development.

Negative impact

ESOPs, a form of sweat equity, it is felt, has always been the motivating factor for employees from the corporate point of view, and bringing it now under FBT will certainly have a negative impact. The FBT exemption for free samples and displayed, however, has been welcomed.

Stating that MAT has been rendered more complicated, the chamber president said tax exemption given to companies under Sections 10A and 10B (for all SEZs and STP units) will now be subject to MAT.

Forward-looking steps

Complimenting the Government for taking the economy into a higher growth trajectory, Mr Deepak Pahwa, President of Indo-American Chamber of Commerce, said rolling over TUFs, R&D incentives and more sops to the tourism sector were forward looking steps.

Pointing out that the chamber had expected a more focused attention on the SME sector, which was the backbone of the broad manufacturing sector, he welcomed the various fiscal measures introduced like lowering of peak customs duty on certain goods and removal of SAD on edible oil imports.

He, however, felt that the impact of cut in peak customs duty on domestic industry should be constantly monitored to avoid any undue pressure on domestic units.

Well-balanced

According to Mr S.K. Bangur, President of Indian Chamber of Commerce, the Budget was well-balanced with clear long term perspective focusing on the farm sector growth in a big way. Keeping the revenue deficit and the fiscal deficit to within the targeted range (as a percentage of GDP) through controlled measures was reflective of good financial management of resources, he pointed out.

Describing the Budget as singling out "inclusive growth, infrastructure and industrial development", Mr Sanjay Budhia, a senior committee member of ICC, said the Finance Minister's promise of export-friendly measures (likely to be revealed in the Exim Policy statement on March 31, 2007) augured well for the country's exports.

Corporate tax

Mr P.R. Agarwala, President of Bharat Chamber of Commerce, said while the removal of surcharge on corporate income-tax on companies' income below Rs 1 crore was most welcome, the hike in dividend distribution tax from 12.5 per cent to 15 per cent was a retrograde step. The first time introduction of export duty on iron ore and chromium, he felt, would hurt exports seriously, "and the markets of Australia and Brazil nurtured against competition will now be lost".

Thrust to farming

According to Mr Santosh Saraf, President of Merchants Chamber of Commerce, the Budget focus has been spot on, giving the necessary thrust to agriculture, but "there is hardly any justification for raising dividend tax from 12.5 per cent to 15 per cent".

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