Budget 2014-15 Highlights

UNION BUDGET 2014-15

MAJOR HIGHLIGHTS

BUDGET

“The budget is not just a collection of numbers, but an expression of our values and aspirations.”

-JACOB LEW

“In a budget, how important is art versus music versus athletics versus computer programming? At the end

of the day, some of those trade-offs will be made politically.”

-BILL GATES

STATE OF THE ECONOMY Sub five per cent growth Double digit inflation Global Slowdown Possible poor monsoon Low manufacturing base Delay in project approvals

THE 3 GOALS OF FM

Restoring the pace of growth. Containing inflation and

Concentrating on fiscal consolidation.

BUDGET HIGHLIGHTS1. Fiscal deficit target at 4.1 % for FY2015,

3.6% of GDP for FY16, 3% for FY17.2. High level committee to decide on cases of

retrospective amendments.3. FDI cap in defence raised to 49% from 26%4. FDI cap in insurance sector raised to 49%

from 26%.5. ₹7,060 crore allotted for developing ‘100

Smart Cities’.

BUDGET HIGHLIGHTS6. Skill India, a skill programme to improve

employability of youths, to be launched.7. Focus on technology-driven second green

revolution.8. Push for the Amritsar-Kolkata industrial

master plan.9. 8,500 km of National Higways10. No GST implementation date announced,

however commitment to introduce GST affirmed.

BUDGET HIGHLIGHTS6. 10-year tax holiday for power generation,

distribution firms.7. No customs duty on LCD and LED TV

panels of below 19 inches.8. Colour picture tubes exempted from basic

customs duty.9. Exemption from 4 % special additional duty

on components for PCs.10. Excise duty increased on cigarettes,gutkha,

tobacco.

BUDGET HIGHLIGHTS6. ₹500 cr for Ultra Mega Solar Power Projects

in Rajasthan, Gujarat, Tamil Nadu, and Ladakh.

7. ₹500 crore to develop five tourist circuits with themes.

8. Sarnath-Gaya-Varanasi Buddhist circuit with world-class tourist amenities.

9. ₹1,000 crore for rail connectivity in Northeast.10. ₹200 cr for power and 500 cr for water ₹

reforms to make Delhi a world class city.

PERSONAL FINANCE Announcement to raise the exemption limit

for individuals from 2 lakh to 2.5 lakh ₹ ₹and also for senior citizens from 2.5 lakh ₹to 3 lakh.₹

Announcement to raise the deduction limit under Section 80C from 1 lakh currently ₹to 1.5 lakh.₹

Investment ceiling in the tax-free PPF scheme has been raised to 1.5 lakh from ₹

1 lakh.₹

EMPLOYMENT/EDUCATION ₹10,000 crore incubation fund, thrust on more jobs. “Skill India” that would equip the youth with skill,

with an emphasis on employability and entrepreneur skills.

Five new IITs and five more IIMs. 12% increase in overall allocation for education. Increased from 74,621 crore to 83,771 crore.₹ ₹ Four more AIIMs-like institutions in Andhra Pradesh,

West Bengal, Vidarbha and Poorvanchal.

SOCIAL SECTOR Two years on, free drug scheme takes center-

stage in health plan. 12 more government medical colleges will be set

up and dental facilities will be provided at all hospitals.

Health sector gets 30,645 crore; Jaitley ₹promises “health for all”, gives fillip to rural healthcare.

Department of Health Research gets 726 crore.₹ Department of AIDS control gets 1,785 crore₹

BUDGET & SERVICES

WHAT IS A SERVICE ?? A type of economic activity that is intangible, is not stored

and does not result in ownership.

A service is consumed at the point of sale.

Services are one of the two key components of economics, the other being goods.

Examples of services include the transfer of goods, such as the postal service delivering mail, and the use of expertise or experience, such as a person visiting a doctor.

SERVICE TAX Service Tax is a tax imposed

by Government of India on services provided in India.

The service provider collects the tax and pays the same to the government.

It is charged on all services except the services in the negative list of services.

The current rate is 12.36% on gross value of the service.

BREIF HISTORY Service tax first levied at a rate of 5% flat from 1994 -

2003. From Sept. 2004 it was increased to 8% flat plus

education cess of 2%. The rate of service tax was enhanced to 12% by Finance

Act, 2006 w.e.f 18.4.2006. Finance Act, 2007 has imposed a new secondary and

higher education cess of 1% on the service tax w.e.f 11.5.2007, increasing the total education cess to 3% and a total levy of 12.36 %

From 1 July 2012 the concept of taxation on services was changed from a 'Selected service approach' to a 'Negative List regime'.

WHY DO WE NEED TO LEVY A TAX ON SERVICES…..?

STATISTICS OF SERVICE TAXFinancial Year Revenue Rupees(in crores) Number of services

1994-1995 407 31995-1996 862 61996-1997 1059 61997-1998 1586 181998-1999 1957 261999-2000 2128 262000-2001 2613 262001-2002 3302 412002-2003 4122 522003-2004 7891 622004-2005 14200 752005-2006 23055 842006-2007 37598 992007-2008 51301 1002008-2009 60941 1062009-2010 58422 1092010-2011 71016 1172011-2012 97509 1192012-2013 132518 Negative List Regime

NEGATIVE LISTNegative list of Service Tax is comprised of 17 heads:

Services by Government or a local authority Services by the Reserve bank of India Services by a foreign diplomatic mission located in India. Services relating to agriculture or agricultural produce. Service by way of access to a road or a bridge on payment of toll charges Betting, gambling or lottery. Admission to entertainment events or access to amusement facilities Transmission or distribution of electricity by an electricity transmission or

distribution utility Services by way of renting of residential dwelling for use as residence Funeral, burial, crematorium or mortuary services including transportation of the

deceased. Two more services have been included in the negative list services in interim

Budget 2014, as  mentioned below:-a)      Loading, unloading, packing, storage and warehousing of rice andb)      Services provided by blood banks

INDIA’S SERVICES SECTOR A prominent sector in terms of

contribution to national and states’ incomes, trade flows, FDI inflows, and employment.

57 per cent share in GDP In 2013-14 the growth rate of the

services sector at 6.8 per cent

SERVICE TAX AND BUDGET No change in effective Service tax rate of 12.36%. Amendments in scope of negative list and list of

exempt service. Reverse charge mechanism made applicable for

two more services. Location of service provider to be the place of

supply for an intermediary of goods. Powers granted to revenue officers to undertake

search and seizure. Graded increase in interest rates for delay

beyond six months (ranging from 24% to 30%).

SERVICE TAX AND BUDGET The following key changes will be effective on enactment of

the Finance Bill:

Following services to be removed from the negative list of services:

Services such as advertisements in internet websites, out-of-home media, on film screen in theatres, bill boards, conveyances, buildings, cell phones, automated teller machines, tickets, commercial publications, aerial advertising.

Radio taxis or radio cabs, whether or not air-conditioned.

PERFORMANCE OF SERVICES

SHARE AND GROWTH OF SERVICES

STATE WISE SERVICES

FDI INFLOWS IN SERVICES

INDIA’S SERVICES EXPORTS

INDIA’S SERVICES EMPLOYMENT

WORLD SERVICES SECTOR

CHALLENGES & OUTLOOK Subdued performance in the last three years. The immediate challenge in this sector is

revival of growth. Focus on services with high manufacturing-

sector and employment linkages. Signs of revival in growth of the aviation

sector Some quick reforms and removal of barriers

and obsolete regulations could further help this revival