Sunday, 1 April 2012

Budget 2012-13 -- No Support to Digitalisation

l though Ministry of Information and Broadcasting has reiterated that it will adhere to the Sunset date for switching off analogue, starting from 01 July 2012, little has been done to facilitate the move in terms of financial incentives, tax exemptions, duty waiver, infrastructure recognition as recommended by the Regulator TRAI in 2010.
Budget 2012-13 Finance Minister Pranab MukherjeeThe Finance Minister has not given any importance to the Digitalisation process, so much being hyped by the I&B Ministry and rejected all proposals of the Ministry in the Budget 2012. It is really shocking to see how the industry is being meted out a step-motherly treatment by the government. Crores of rupees are distributed to the telecom industry every year as incentives, most of  which is siphoned out in scams like the 2G or through faulty policies like the broadband policy that has given dismal results in the last ten years; whereas Broadcasting industry that empowers the common man with information and education in 150 million households, has been totally neglected.
This year too, the Budget has been most disappointing for the Cable & Satellite industry which is facing extreme hardship to follow the diktat of the Ministry without even the basics in place. 

However, there is one matter of solace that "admission to entertainment or access to amusement services" has been placed in the Negative List  a new List for which there will be no service tax. 

Advertisements broadcast by television or radio, however, will be excluded from the Negative List. What could hurt is the increase in service tax from 10 per cent to 12 per cent proposed in the budget for 2012-13.

The film industry has also been exempted from service tax on copyrights relating to recording of cinematographic films. This, he said was being done "to add to the spirit of celebration" since the year 2012 marks the beginning of the centenary year of Indian cinema.

The Finance Minister said in Budget speech: "Despite the change in titles from Dada Saheb Phalke's “Raja Harishchandra” to “Ra. One” in recent times, the industry has played a pivotal role in unifying our country in the wake of her considerable diversity."

He said in addition to the negative list, there is a list of exemptions which include sportspersons and performing artists in folk and classical arts, apart from independent journalists.

The Negative List also contains selling of space or time slots for advertisements other than advertisements broadcast by radio or television; and betting, gambling or lottery.

The Finance Minister also announced full exemption from basic customs duty for LCD and LED TV panels, and parts of memory card for mobile phones. He retained the lower merit rate of excise duty on mobile phones at one per cent.

The Finance Bill which formed part of the Budget documents described 

"Entertainment event" as an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, by way of exhibition of cinematographic film, circus, concerts, sporting event, pageants, award functions, dance, musical or theatrical performances including drama, ballets or any such event or programme.
"Amusement facility" is described as a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places but does not include a place within such facility where other services are provided.
"Advertisement", the Bill says, means any form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person.
"Betting or gambling" means putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring.
The Bill also lists the declared services to include temporary transfer or permitting the use or enjoyment of any intellectual property right; and development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software.

Budgetary Provisions for I & B Ministry

The Information and Broadcasting Ministry's total plan and non-plan budget for 2012-13 has risen marginally to Rs 27.37 billion compared to Rs 26.44 billion last year and the revised estimates of Rs 26.05 billion.
The allocation for the Ministry includes an outlay of Rs 935.5 million for projects in the north eastern part of the country including Sikkim. 

The allocation under the head 'Secretarial-Social Services' has been doubled to Rs 1.27 billion as against the revised estimates for last year of Rs 639.8 million and the 2011-12 allocation of Rs 754.5 million. This will also be spent towards the centenary celebration of Indian cinema, the National Film Heritage Mission, the proposed National Centre for Animation and Gaming, and anti-piracy activities. 

The allocation for Press Information Services which includes grants to the Press Council of India has been lowered to Rs 588.9 million from last year's Rs 592.4 million and the revised estimates of Rs 543.4 million, to meet the expenses for the Press Information Bureau, the Press Council of India, and for running the non-aligned countries news pool.

The allocation to the Electronic Media Monitoring Centre has been marginally reduced to Rs 43.8 million from the revised estimates of Rs 42.8 million in 2011-12 (as against the Rs 45 million allocated in the budget last year). The EMMC was set up for monitoring television and radio channels for violation of programme and advertising codes.

The allocation for advertising and visual publicity has been raised to Rs 1.66 billion as against the allocation last year of Rs 1.23 million, following the increase in the advertising rates of the Directorate of Advertising and Visual Publicity. 

Meanwhile, for the third year in a row, the government has not announced any investment in the National Film Development Corporation. 

The grant-in-aid to Prasar Bharati in the budgetary allocation of the Ministry has been increased to Rs 15.74 billion as against Rs 14.84 billion in 2011-12 and the revised allocation of Rs 15.74 billion.

However, there is increase in the Ministry's investment in Prasar Bharati: with Rs 4.01 billion in the plan outlay and an additional Rs 4 billion in the non-plan outlay as against last year's total investment of Rs 3.8 billion which was revised later in the year to Rs 2.76 billion.

This has perhaps, been done to meet the extra expenditure on salaries which has fallen on the shoulders of the Government since all Prasar Bharati employees who were in employment as on 5 October 2007 have been given deemed deputation status.

While the grant-in-aid is to cover the gap in resources for meeting revenue expenditure, the investment is to finance the capital expenditure of the pubcaster.

However, despite the reference in his speech to the centenary of Indian cinema, Finance Minister Pranab Mukherjee has announced a drastic cut in the budget for the film sector in the Ministry.

The budget for the film sector for 2012-13 is Rs 841.1 million as against the allocation of Rs 1.37 billion and revised estimates of Rs 1.34 billion. There is an additional outlay of Rs 66.7 million towards certification of cinematographic films.

General Provisions of the Budget Direct Taxes

Income tax slabs for individual taxpayers to be as follows:
  • Tax proposals for 2012-13 mark progress in the direction of movement towards DTC and GST.
  • DTC rates proposed to be introduced for personal income tax.
  • Exemption limit for the general category of individual taxpayers proposed to be enhanced from Rs.1,80,000 to 2,00,000 giving tax relief of Rs. 2,000.
  • Upper limit of 20 per cent tax lab proposed to be raised from Rs. 8 lakh to Rs. 10 lakh. Proposal to allow individual tax payers, a deduction of upto 10,000 for interest from saving s bank accounts.
  • Proposal to allow deduction of upto 5,000 for preventive health check up.
  • Senior citizens not having income from business proposed to be exempted from payment of advance tax.
  • To provide low cost funds to stressed infrastructure sectors, rate of withholding tax on interest payment of ECBs proposed to be reduced from 20 per cent to 5 per cent for 3 years for certain sectors.
  • Restriction on Venture Capital Funds to invest only in 9 specified sectors proposed to be removed.
  • Proposal to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies at a lower tax rate of 15 per cent upto 31.3.2013.
  • Investment link deduction of capital expenditure fore certain businesses proposed to be provide at the enhanced rate of 150 per cent.
  • New sectors to be added for the purposes of investment linked deduction.
  • Proposal to extend weighted deduction of 200 per cent fore RETD expenditure in an in house facility ofr a further period of 5 years beyond March 31,2012.
  • Proposal to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services.
  • Proposal to extend the sunset date for setting up power sector undertakings by on year for claiming 100 per cent deduction of profits for 10 years.
  • Turnover limit for compulsory tax audit of account and presumptive taxation of SMEs to be raised from 60 lakhs to 1 crore.
  • Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.
  • Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector.
  • Reduction in securities transaction tax by 20 pr cent on cash delivery transactions.
  • Proposal to extend the levy of alternate Minimum Tax to all persons, other than companies, claiming profit linked deductions.
  • Proposal to introduce General Anti Avoidance Rule to counter Aggressive tax avoidance scheme.
  • Measures proposed to deter the generation and use of unaccounted money.

Indirect Taxes 

Service Tax
  • Service tax confronts challenges of its share being below its potential, complexity in tax law, and need to bring it closer to Central Excise law for eventual transition to GST.
  • Overwhelming response to the new concept of taxing services based on negative list.
  • Proposal to tax all services except those in the negative list comprising of 17 heads.
  • Exemption from service tax is proposed for some sectors.
  • Service tax law to be shorter by nearly 40 per cent/
  • Number of alignment made to  harmonies Central Excise and Service Tax. 
  • A common simplified registration form and a common return comprising of one page are steps in this direction.
  • Revision Application Authority and Settlement Commission being introduced in Service Tax for dispute resolution.
  • Utilization of input tax credit permitted in number of services to reduce cascading of taxs.
  • Place of Supply Rules for determining the location of service to be put in public domain fore stakeholders' comments.
  • Study team to examine the possibility of common tax code for Central Excise and Service Tax.
  • New Scheme announced for simplification of refunds.
  • Rules pertaining to point of taxation are being rationalized.
  • To maintain a healthy fiscal situation proposal to raise service tax rate from 10 per cent to 12 per cent, with corresponding changes in rates for individual services.
  • Proposal from service tax expected to yield additional revenue of 18,660 Crore.

Other proposals for Indirect Taxes
  • Given the imperative for fiscal correction, standard rate of excise duty to be raised from 10 per cent to 12 per cent, merit rate from 5 per cent to 6 per cent and the lower merit rate from 1 per cent to 2 per cent with few exemptions.
  • Excise duty on large cars also proposed to be enhanced.
  • No change proposed in the peak rate of customs duty of 10 per cent on non-agricultural goods.
  • To stimulate investment relief proposals for specific sectors- especially those under stress.

  • Concessions and exemptions proposed for encouraging the consumption of energy-saving devices, plant and equipment needed for solar thermal projects.
  • Concession from basic customs duty and special CVD being extended to certain items imported for manufacture for hybrid or electric vehicle and battery packs for such vehicles.
  • Proposal to increase basic customs duty on imports of gold and other precious metals.

Additional Resource Mobilization
  • Proposals to increase excise duty on 'demerit' goods such as certain cigarettes, hand-rolled bidis, pan masala, gutkha, chewing tobacco, unmanufactured tobacco and zarda scented tobacco.
  • Cess on crude petroleum oil produced in India revise to Rs. 4,500 per metric tone. 
  • Basic customs duty proposed to be enhanced for certain categories of completely built units of large cars/MUVs/SUVs


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