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Is there a devil in the details this time? Deloitte always has that answer.
Rohinton Sidhwa: We are looking through the fine print and there does seem to be some changes over there. Most importantly, what was really nice was that the finance minister started off quoting a survey that we did on GST, where she talked about the success of the GST implementation, which was a survey of almost 600 companies around India. It got quoted in the budget speech. With regard to some of the other changes that we are seeing, there seems to be some tinkering on the rates of TCS. Earlier, TCS was imposed on foreign exchange remittances. Now that TCS is applicable at 20% which seems very high. Obviously, one could file the tax return and claim a refund of the TCS, but it was a very high rate. There was a lot of criticism around that. It seems that that rate is coming down in many of the categories to 5%. So from 20% to 5%! The other thing that we are picking up is there seems to be some tinkering about the way agricultural income is being calculated, but we are still looking through the fine print on that.
If TCS goes down, to put it very simply, when you are traveling abroad, you will have to pay less?
Rohinton Sidhwa: Yes, there was this controversy that happened around whether TCS would apply on credit cards as well. They excluded credit cards from it, but it does apply on exchange that you buy either in cash or loading on an exchange card. And over there, the TCS on that was 20%. There were exemptions for certain categories like medical, for instance and education was an exemption. And over there, there was a limit of Rs 7 lakh, up to which, it was 5% and then it went up to 20% straight away. Now it seems that they are bringing that 20% down.
It is back to 5% and it is going to be applicable from July 1st. But can I say that since there was a specific mention by the finance minister, no changes in direct taxes and indirect taxes, you will have an easy evening. Today, there will be less work, there is still a budget.
Rohinton Sidhwa: Well, we are still trawling through the details, so we should find out soon.
I still remember that that announcement of that 20% jump in TCS had come the day of the demonetization.
Rohinton Sidhwa: The other big thing that I really saw coming out of her speech was, and I am probably calling it loosely because I have not seen the scheme yet, but I call it a PLI for R&D and innovation. And that is the Rs 1 lakh crore funding that you are getting for it.
Vigyan and Anusandhan. She specifically mentioned that. There is a special mention also on states giving credit to the tourism sector at a cheaper rate.
Rohinton Sidhwa: Yes.
Is that something which is significant?
Rohinton Sidhwa: So tourism is a natural thing which really boosts GDP, especially in some of our tier two and tier three cities. They have used it very smartly with the expansion of air connectivity into some of these towns. That will really pick up the GDP in those areas.
Revenue growth assumption in the last couple of years has been very conservative. Nominal GDP is about 13, revenue growth assumption is 10 to 11. Is on high base, a 10 to 11% revenue growth assumption, a decent assumption?
Rohinton Sidhwa: We already have inflation. On top of that, you need the GDP growth., I would say that the assumptions are conservative. If I were required to give projections for the next year, you tend to be conservative. But look at the Bayes effect that is happening. What is happening is, one, incomes are rising across India. Two, number of taxpayers who are coming into the tax net are increasing. So that effect is difficult to quantify, and it is difficult to measure. I feel a lot of the excess that is coming now. Earlier, we used to attribute this excess primarily to better profits of corporates or to better TDS. But remember, this rally is not coming in corporate tax. It is coming in personal tax, 27% above and net of refunds. So that means we are seeing a significant base of individual taxpayers growing in the country. And that is a function of growth in general GDP and growth in the absolute numbers.
We still have to see the full effect of that, because as you know, we have the benefit of demographics, and that is now starting to kick in. So that is showing its face in tax collection.
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