The Hindu Business Line : Small gestures for the small man

One doesn't know for sure whether the Finance Minister and his team burnt the proverbial midnight oil Tuesday night to assuage, in the wake of the dawning realisation reinforced by the electoral reverses in two States, the badly mauled feelings of the aam aadmi reeling under the onslaught of relentless price rise. But there are gestures, some small and some insignificant, to pacify him.

Senior citizens have been promised two things - the facility of reverse mortgage to convert their illiquid immovable properties into steady monthly inflow without the obligation to pay off during their lifetime. In a country where parents dote on their children, it is doubtful whether anyone would seek the wicked satisfaction of burdening his progeny after his lifetime. Special life insurance schemes for senior citizens who are generally shunned by the insurers may not have many takers given the meagre disposable income in their hands, unless the wards come forward to pay the premium enticed by the promise of a bounty on a sad denouement.

The decision to phase out central sales tax (CST) and the first firm step taken in this regard by reducing it from 4 per cent to 3 per cent may not translate into major savings for households. But the reduction in the ad valorem excise duty rate on diesel and petrol from 8 per cent to 6 per cent could mean a reduction in fuel bills for transporters and by extension, to the households, given that petroleum prices touch everyone's life mainly through the pass-through effect.

Service tax rate has not been revised but the increase in education cess from the existing 2 per cent to 3 per cent means an effective increase in rate of service tax as well. To be more precise, it goes up from 12.24 per cent to 12.36 per cent, which would have the effect of pushing up our telephone and other service bills. The doubling of exemption limit for service tax from Rs 4 lakh to Rs 8 lakh is good for small service providers. But many of them are in the habit of collecting service tax on the sly from unsuspecting customers who dare not question their turnover. The Government ought to read the riot act to such unscrupulous retailers.

On the I-T front, the increase in the tax-free threshold by Rs 10,000 across the board means a small reduction in the tax bill. The increase in distribution tax from 12.5 per cent to 15 per cent means less distributable income, especially in the hands of those companies that have to scrape the bottom of the barrel to pay shareholders something.

Increase in the Mediclaim premium deductible by Rs 5,000 is not what the salaried class especially bargained for - they wanted a more reasonable exemption regime for medical reimbursements they obtain from their employers. But sadly, the status quo continues - a piffling Rs 15,000 per annum.

(The writer is a Delhi-based chartered accountant.)