To fund basic amenities, services sector may have to pay more

The thinking seems to be that while services account for more than 50 per cent of the GDP, only 56 of them are currently subject to taxation. This number is likely to be increased.

Also, there is scope for raising the service tax rate from its current level of 8 per cent. This move would also be a way of making rich farmers — who consume more — pay their share while protecting the sector as a whole. In fact, the Budget is likely to exempt farmers whose land may be acquired by the government from capital gains tax.

While the Budget may largely stick to existing levels of tax rates on the salaried classes and corporates other than the 2 per cent cess already announced to finance education, the emphasis would be on rationalising exemptions and having special schemes for the ‘‘vulnerable classes’’.

At the moment, the ministry’s overriding concern seems to be employment, especially since the Common Minimum Programme holds out a guarantee of providing 100 days of employment to each rural household.

It’s learnt that the Ministry has decided to study the Maharashtra model which, for the past 30-odd years, has provided job guarantees. It will be an interesting study as Chidamabram has reportedly asked for a review of not just the success stories of this programme in the Solapur-Ahmednagar belt but also its relatives failures in the Konkan region.

In general, the emphasis will be on the basics — jobs, farmers and infrastructure. In this context, the government has decided to support the Infrastructure Development Financing Corporation (IDFC) which had come under a cloud when the NDA government virtually ‘‘sacked’’ its former chief, Naser Munjee. The IDFC will be told to go back to its original charter of leading other financial institutions to invest in infrastructure projects.

Meanwhile, there will be encouragement for farmers to grow. Technical upgradation in agriculture projects is likely to attract concessional interest rates. Those who have become comfortable growing just wheat and rice could be offered incentives to switch to other specialised crops.

If all this costs money, it will probably not come from higher tax rates. Instead, apart from the service tax, the revenue is likely to come from tightening direct tax collections and excise collections by bringing them online.