Hailing Finance Minister Arun Jaitley's maiden full year Budget, Rahul Bajaj, Chairman, Bajaj Auto said the FM has done a great job. "There are lot of people and especially almost everyone in the opposition will say this is pro-rich, pro-corporate, corporate tax you have reduced from 30 percent over a four year period starting next year to 25 percent etc, those who want to criticise for the sake of criticising I am happy they are in the opposition," he added. Rajiv Memani, Country Managing Partner, Ernst & Young LLP also contributed to the discussion.
Below is the verbatim transcript.
Shereen: A lot of people are already commenting and saying that this is as close to a dream Budget as we could possibly get. In your assessment, how well has Arun Jaitley done?Bajaj: He couldn't have done better in the circumstances. I think he has done a great job. I shouldn't say this but I am pleasantly surprised. Somebody can ask me why am I surprised? really I am not. However that is the way I could express my happiness. My one single concern is very unusual here. There are lot of people and especially almost everyone in the opposition will say this is pro-rich, pro-corporate, corporate tax you have reduced from 30 percent over a four year period starting next year to 25 percent etc, those who want to criticise for the sake of criticising I am happy they are in the opposition.
Shereen: Let me ask you as far as taxes are concerned along the lines that we had discussed the DTC in it’s current avatar stands to be buried, GAAR has been deferred or pushed back by a few years, GST reiterating on April 1 2016 timeline. Some of the inverted duty structures that we talked about have been corrected. But make sense of this corporate tax reduction over the next four years. we are still waiting the fine print of the document but what is your understanding because this does mean that some exemptions will start to move away as well?
Memani: Where the Finance Minister is at is the effective collection is much lower than what the tax rate is. So what is happening globally right now is corporate taxes are going down and personal taxes at the higher income level brackets are going up and at the lower income they are providing more incentive. That is exactly what he is doing. He couldn’t have done it this year, also surprisingly the demand from the industry, this is something that was not a demand of the industry, this is what the government has done and they are trying to match to what is a competitive tax rate. They can’t do it now but they are doing it over a period of four years and hopefully whilst they can’t deal with the administrative issues of the tax department lower tax rates generally help in reduction of tax litigations because the incentive of doing these high pitched cases is reducing.
Shereen: Big positive for corporate India. Every time we talk to corporates they talk about simplification of the tax regime. In that sense even though as they have pointed out and I spoke to you this morning about the end of the exemption raj as the chief economic adviser called it does this then pave the way for a simpler, more predictable tax regime with the eventual rates coming down to 25 percent?Shriram: Absolutely, the direction is very clear.Shereen: So, no quibbles about exemptions going away?Shriram: No, this is much better for two reasons. One is the more exemptions you have the more complexity of the law you have the more complicated it is to fill up the tax return and then you are quibbling and fighting what is right, what is wrong, what is there, what is not there and secondly having a 34 percent tax rate what you were talking in the morning including the cess of from 30 now to 25 actually this figure outside for an investor also looks more asking than more inviting. When the actual rate of 22-23 with the exemptions one will bring it down to the actual level and remove the exemption to simplify everyone wants a simpler tax regime on the corporate side and on the people’s side.
Shereen: Fiscal deficit at the end of the day is a number and the government has maintained or clarified its position as far as the medium term framework is concerned. But we were talking about entrepreneurship, small and medium businesses, R&D, innovation and we have delivered at least some sort of incentive on that front?
Shaw: First and foremost he has walked the talk. It is a Budget that is not just directional anymore but he is focussing on being destinational. So they are focussing on how are they going to deliver. So we are seeing some very positive statements of how they want to do it and that is very positive. I am normally very critical of all budgets and this time around I would say that they have met a large number of expectations.
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