The Finance Minister might have hit the right notes on agriculture and social sector upliftment but the budget has failed to bring any cheer to the corporate sector. While the additional 1 per cent cess for education will squeeze the bottom lines of companies, industry chambers CII and Ficci have come down heavily on government’s attempts to micro manage prices in the cement industry. “The thrust on education and social sector is commendable but there is no ideological logic in what is being proposed for the cement industry. This is not in line with modern way of fiscal management and we criticise the attempts to micro manage the market,” said CII President and Ashok Leyland managing director R Seshasayee. Ficci secretary general Dr Amit Mitra agrees. “The differential duties in the cement industry comes as a shocker and sets a very bad precedent. There surely are other ways of managing prices and this step will only encourage corporates to try and underplay their excise duty obligations,” he said. The 1 per cent additional education cess that will compliment the existing 2 per cent cess has evoked a mixed response. While everybody admits that education is a priority area, the cess will further squeeze operating margins. “Any additional levy be it for the social sector, education or anything else puts extra pressure on us. The problem with cess is that it is not revoked once its utility is over. We are still paying the Natural Calamities Cess which was introduced after the Gujrat earthquake,” said Hero Honda Motors Ltd CEO Pawan Munjal. There is disappointment within the corporate sector due to the lack of any reduction on corporate taxation. “We have been asking for a cut in corporate taxes considering that its among the highest in India and the finance minister had himself said that tax reductions in the past have led to an increase in revenue collections. The cess coupled with the increase in dividend distribution tax which has gone up from 12.5 to 15 per cent means that overall rate of corporate taxes has actually gone up by 1.2-1.3 per cent,” Mitra said adding that given that the economy has been growing at such a high clip, there was a chance for further reforms which is lost. But the biggest dampner is the expansion of the ambit of Fringe benefit tax with Employee stock ownership plan (ESOP) also being brought under its net. The industry has been hoping without any luck that FBT would be done away with completely but the move has not gone down well with anybody. “There are some worrying points in the budget and FBT is one of those. We have been opposed to this form of taxation and bringing esops into its net is not a welcome step,” Seshasayee said.
