Union Budget 2012: CII's hopes and expectations

A date is finally set. The Union Budget will be presented on March 16 post the State elections. This could be the UPA government's make-or-break Budget. The economy is going through a slowdown. The bureaucracy is in a state of paralysis and corporate India is suffering from a bout of depression.

Given these fiscal and political constraints can Pranab Mukherjee change the mood of the nation? Will he present an agenda for growth or a statement of accounts?

Rajiv Memani, chairman of CII's Task Force on GST implementation discuss India Inc's expectations from Budget 2012 with CNBC-TV18's Shereen Bhan.

Below is an edited transcript of the interview. Also watch the accompanying videos.

Q: Do you believe that given the fiscal room that he has there is going to be any sort of a reduction in taxes or do you actually believe that we are going to see a hike in taxes especially on items like diesel vehicles, as well as in goods like cigarettes?

Memani: Yes, on diesel vehicles at least by what one reads and what's happening, that it's likely that it may come. Cigarettes are the favourite and come up every year. So I am sure they will not miss n it this year. I am not sure whether they will have room as much to reduce tax rates, but my sense is they would be well advised to preserve and not increase tax rates whether an indirect tax or on the direct tax side.

If they can provide for some incentives especially around investment allowance or something, which may not have an immediate impact, but it will encourage manufacturing, that will be great. I think it's important that they will also need to augment tax revenues. They have to try and see there is a lot of money that's locked in disputes and one of the thrusts could be to see how they can unlock the money that's stuck up in disputes.

Q: Do you anticipate a hike as far as service tax is concerned because that's the big buzz and speculation at this point? Do you expect a hike in service tax?

Memani: No, I don't expect so. If they try and bring in the negative list then I hope there is no hike. If they bring in the negative list which looks quite likely, they will stay away from those areas that are there in the state ambit. Even if you look at the GST, the central rate is around 10%. So, I don't think they will hike it.

Q: There was an opposition to buyback, but there was also an opposition to a follow-on public offer. For instance, SAIL very publicly stated it wasn't interested in doing an FPO at this point in time.

Memani: I think what the government can also do is, in the earlier round of disinvestment that happened they were still holding minority stakes in some of those companies and they are now quite valuable. So, that is not linked to the market, I am surprised that the government is not pushing the pedal on that because that can release a significant amount and help them come very close to their disinvestment target.

Q: You are talking specifically about BALCO and Hindustan Zinc aren't you?

Memani: Those two and there are two-three other companies as well. So, I am surprised that they are not pushing the pedal on that. There is a question mark at least in my mind as to why they are not pushing.

Q: Post the Vodafone ruling, we are actually going to see the government move towards GAAR like provisions perhaps in this Budget itself. What are you picking up? Do you anticipate that happening?

Memani: You are right; the government has taken this as a setback. They are viewing this as a setback. There was first some apprehension that they may want to bring in something that is retrospective but that's very unlikely given the fact that the Supreme Court has delivered a very clear verdict and I don't think they would want to take on the verdict of the Supreme Court. They understood the intent.

What I have always said is if the statute doesn't support what the government is intending to do, they may bring in some GAAR like provision. They may not bring in some more stringent anti-avoidance rules, they may bring in limitation of benefit clauses around the Mauritius treaty, but there is a downside to it which is why the government has always been hesitant in doing that. There are a string of other cases that are likely to come up which pretty much establishes that the earlier provisions did not support what the government is intending.

Q: The hope is that DTC and GST should come in together, but what we are picking up is that some aspects of the DTC and some aspects of the GST may come through this time around. He may make the transition towards both is that your sense?

Memani: I think the empowered committee will be about to give their report, so I have a feeling that they will respect the role that the empowered committee is going to play. I am hopeful that unless it's something it is very critical, provisions within the DTC will not come.