Buget 2009 Evaluation on Service Industry

8/8/2019 Buget 2009 Evaluation on Service Industry

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TERM PAPER

OFMANAGERIAL ECONOMICS

TOPIC:- BUDGET 2009 AN EVALUATION OF

ITS EFFECT ON SERVICE INDUSTRY

SUBMITTED BY:- ARUN SAINI

MBA 1 St Sem

ROLL- A25

SUBMITTED TO:- MR.. SACHIN LAL

KASHYAP


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construction sectors grew at the rate of 26 per cent and 13.5 per cent per annum, respectively.

Exports grew at an annual average growth rate of 26.4 per centin US dollar terms in the period 2004-05 to 2007-08. Foreign tradeincreased from 23.7 per cent of GDP in 2003-04 to 35.5 per cent in2007-08.OUTLOOK FOR THE YEAR 2009-2010:-

Despite the global financial crisis which began in 2007impacting most emerging market economies, 7.1 per cent rate of GDPgrowth in the current year makes India the second fastest growingeconomy in the world.

Fallout of global slowdown on Indian economy were counteredwith fiscal stimulus packages announced on December 7, 2010 andJanuary 2, 2009 providing tax relief to boost demand and increasingexpenditure on public projects.

Government accorded approval to 37 infrastructure projectsworth Rs 70,000 crore from August, 2010 to January, 2009 alone.

Under PPP mode, 54 Central Sector infrastructure projects witha project cost of Rs 67,700 crore given in-principal or final approvaland 23 projects amounting to Rs 27,900 crore approved for viabilitygap funding in 2010-09.

India Infrastructure Finance Company Ltd. (IIFCL) to refinanceup to 60 per cent of commercial bank loans for PPP projects involvingtotal investment of Rs 1,00,000 crore in infrastructure over the nexteighteen months.

In addition to RBI taking number of monetary easing andliquidity enhancing measures such as reduction in cash reserve ratio,statutory liquidity ratio and key policy rates, Government has takenspecific measures which include extension of export credit for labour intensive exports, improving pre and post shipment credit availability,additional allocations for refund of Terminal Excise Duty/CST andexport incentive schemes besides removal of export duty and export

ban on certain items. A Committee of Secretaries set up to address procedural problems faced by exporters.


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Record US$ 32.4 billion FDI received in 2007-08 andnotwithstanding financial uncertainty and slowdown, FDI inflowsduring April-November, 2010 were US$ 23.3 billion recording agrowth of 45 per cent over the same period in 2007.

FRBM targets for the current year and for fiscal 2009-10 relaxedto provide much needed demand boost. However, medium termobjective is to revert to fiscal consolidation at the earliest.INITIATIVES AND ACHIEVEMENT :-

Agriculture

Plan allocation for agriculture increased by 300 per cent from2003-04 to 2010-09. Rashtriya Krishi Vikas Yojna launched in 2007-

08 with an outlay of Rs 25,000 crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during EleventhPlan period.

Agriculture credit disbursement increased three times from Rs87,000 crore in 2003-04 to about Rs 2,50,000 crore in 2007-08.To strengthen short-term cooperative credit structure, revival

package in 25 states involving financial assistance of about Rs 13,500crore is being implemented.

Interest subvention to be continued in 2009-10 to ensure thatfarmers get short term crop loans upto Rs 3 lakh at 7 per cent per annum.

The Agricultural Debt Waiver and Debt Relief Scheme, 2010was implemented by June 30, 2010 as scheduled. Debt waiver/debtrelief amounting to Rs 65,300 crore covers 3.6 crore farmers.

Despite higher procurement cost and higher international pricesduring the last 5 years, the central issue prices under Targeted Public

Distribution System (TPDS) maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya Anna Yojana (AAY)categories and at July, 2002 levels for Above Poverty Line (APL)category.

Minimum Support Price (MSP) for common variety of paddyincreased from Rs 550 per quintal in 2003-04 to Rs 900 per quintal for


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the crop year 2010-09. In case of wheat, increase was from Rs 630 per quintal in 2003-04 to Rs 1080 per quintal for the year 2009. RuralDevelopment

The corpus of Rural Infrastructure Development Fund (RIDF)increased from Rs.5,500 crore in 2003-04 to Rs 14,000 crore for theyear 2010-09. A separate window for rural roads created with a corpusof Rs 4,000 crore for each of the last three years.

As against 60 lakh houses to be constructed under Indira AwaasYojana by 2010-09, 60 lakh twelve thousand houses constructed

between 2005-06 to December, 2010.Panchayat Empowerment and Accountability Scheme (PEAIS)

proposed to be expanded.EDUCATION :-

Major initiatives including a new Centrally Sponsored Schemelaunched to universalize education at secondary stage in the year 2010-09.

Outlay on Higher Education increased 9 fold in the EleventhFive Year Plan. Ordinance promulgated for establishing 15 CentralUniversities. In addition to 6 new Indian Institutes of Technology

(IITs) in Bihar, Andhra Pradesh, Rajasthan], Orissa, Punjab andGujrat which started functioning in 2010-09, two more IITs inMadhya Pradesh and Himachal Pradesh are expected to commencetheir academic session in 2009-10. 5 Indian Institute of ScienceEducation and Research (IISER) announced earlier have becomefunctional. 2 new schools of Planning and Architecture at Vijayawadaand Bhopal have started functioning. Teaching is expected tocommence from academic year 2009-10 in four out of six new Indian

Institute of Management proposed for the Eleventh Plan in Haryana,Rajasthan, Jharkhand and Tamil Nadu.

Due to revision in Educational Loan Scheme by theGovernment number of beneficiaries increased from 3.19 lakh to14.09 lakh and amount of loan outstanding increased from Rs 4,500


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crore as on March, 31, 2004 to Rs 24,260 crore as on September 30,2010.

500 ITIs upgraded into centers of excellence. National Skill

Development Corporation created in July, 2010 with initial corpus of Rs 1,000 crore.

SOCIAL SECTOR :-

Authorised capital of National Safai Karamchari Finance andDevelopment Corporation (NSKFDC) is being raised from Rs 200crore to Rs 300 crore.

Scope of the pre-metric scholarship for children of thoseengaged in unclean occupations expanded and rates of scholarshipdoubled in 2010-09. Annual ad-hoc grant increased by about 50 per cent as compared to earlier rates.

Rashtriya Mahila Kosh to be strengthened by enhancing itsauthorized capital.

'Priyadarsini Project' a rural women's employment andlivelihood programme will be implemented as pilot in the district of

Madhubani and Sitamarhi in Bihar and Shravasti, Bahraich, Rai Bareliand Sultanpur in Uttar Pradesh].

146 lakh persons benefited under Indira Gandhi National OldAge Pension Scheme in the current financial year.

Two new schemes 'Indira Gandhi National Widow PensionScheme' to provide pension of Rs 200 to widows between age groupsof 40-64 years and 'Indira Gandhi National Disability PensionScheme' to provide pension for severely disabled persons.

Widows in the age group of 18-40 years to be given priority inadmission to ITIs, Women ITIs and National/Regional ITIs for women. Government to bear cost of their training and provide stipendof Rs 500 per month.

22 States and Union Territories initiated process to implementRashtriya Swasthya Bima Yojana for BPL familities in the


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unorganised sector and 60 lakh thirty two thousand persons coveredfor death and disability under 'Aam Admni' Bima Yojana (AABY).Public Sector Enterprises

Turnover of Central Public Sector Enterprises increased fromRs 5,87,000 crore in 2003-04 to Rs 10,81,000 crore in 2007-08 and

profits grew from Rs 53,000 crore to Rs 91,000 crore. While number of loss making enterprises came down from 73 in 2003-04 to 55 in2007-08, number of profit making enterprises has gone up from 143 to158 during the same period.

Government approved implementation of Guidelines onCorporate Governance in Central Public Sector Enterprises (CPSEs)in June, 2007.

Corpus of National Investment Fund created out of disinvestment proceeds from Central PSUs stood at Rs 1,815 crore ason December 31, 2010.Financial Sector Reforms

NPAs of Public Sector Banks declined from 7.8 per cent onMarch 31, 2004 to 2.3 per cent on March 31, 2010.

As a result of initiating process of amalgamation and

recapitalization of Regional Rural Banks (RRBs) with negative networth, 196 RRBs merged into 85 RRBs. The Government hascontributed Rs 652 crore for capitalization of RRBs upto December 31, 2010.

Number of reforms undertaken in the last four years to deepenand widen the securities markets and strengthen the regulatorymechanisms for these markets.

The Companies Bill, 2010, undertaking comprehensiverevision of Companies Act, 1956 to enable adoption of internationallyaccepted best practices, has been introduced in the Parliament.

REVISED ESTIMATES :-


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The total expenditure at Rs 7,50,884 crore in B.E. 2010-09 revised toRs 9,00,953 crore in R.E. 2010-09 showing an increase of Rs 1,50,069crore.

Plan Expenditure gone up from Rs 2,43,386 crore in B.E. 2010-09to Rs 2,82,957 crore in R.E. 2010-09.

Non-Plan expenditure increased by Rs 1,10,498 crore in R.E. 2010-09 over B.E. 2010-09.

Revised Estimate 2010-09 for Non-Tax Revenues increased fromRs 95,785 crore in Budget Estimate 2010-09 to Rs 96,203 crore.

Revised Estimates of gross tax collection projected at Rs 6,27,949crore as against B.E. 2010-09 of Rs 6,87,715 crore, primarily due to

pro-active fiscal measures initiated to counter the impact of global

slowdown on the Indian economy.Revised Revenue deficit to be at Rs 2,41,273 crore (4.4 per cent of GDP) as against budgeted figure of Rs 55,184 crore (1 per cent of GDP).

Fiscal deficit to go up from Rs 1,33,287 crore (2.5 per cent of GDP) in B.E. 2010-09 to Rs 3,26,515 crore (6 per cent of GDP).BUDGET ESTIMATES :-

Total expenditure for fiscal 2009-10 estimated at Rs 9,53,231

crore. Plan expenditure estimated at Rs 2,85,149 crore and Non-Planexpenditure at Rs 6,68,082 crore.

Budgetary support in Plan B.E. 2009-10 in comparison to B.E. 2010-09 increased for Department of Rural Development, Departmentof Road Transport & Highways, Railways, Ministry of Power,Department of Industrial Policy and Promotion and Department of Information Technology to meet the requirements of rural andinfrastructure development along with higher allocation for Ministry

of Youth Affairs & Sports and Ministry of Culture to ensure adequateresources for hosting of the Commonwealth Games Allocations toflagship programme which directly impact 'Aam Aadmi' fully

protected.Rs.30,100 crore allocated for National Rural Employment

Guarantee Scheme for the year 2009-10. In 2010-09 employment of


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138.76 crore person days covering 3.51 crore household alreadygenerated.

About 98 per cent habitations covered by primary schools under Sarva Shiksha Abhiyan. Allocation for this programme increased by571 per cent between 2003-04 and 2010-09. Allocation of Rs 13,100crore proposed for 2009-10.

Rs 8,000 crore allocated for Mid-day Meals Scheme for the year 2009-10.

Allocation of Rs 6,705 crore proposed for Integrated Child Development Scheme (ICDS) for the year 2009-10. New WHO childgrowth standards adopted for monitoring growth of children under ICDS.

386 projects amounting to Rs 39,000 crore sanctioned till December 31, 2010 under Jawaharlal Nehru] National Urban RenewalMission (JNNURM). Allocation of Rs.11,842 crore proposed for theyear 2009-10.

Rs.7,400 crore allocated for Rajiv Gandhi Rural Drinking Water Mission, Rs 1,200 crore for Rural Sanitation Programme, Rs 12,070crore for National Rural Health Mission, Rs 40,900 crore allocated for Bharat Nirman for the year 2009-10.

A provision of Rs 100 crore in the Annual Plan 2009-10 made for Unique Identification Authority of India.RIDF-XV proposed with a corpus of Rs 14,000 crore. Separate

window for rural roads to continue with a corpus of Rs 4,000 crore.Interest subvention of 2 per cent on pre and post shipment credit

for certain employment oriented sectors i.e. Textiles (includinghandlooms & handicrafts), Carpets, Leather, Gem & Jewellery,Marine products and SMEs extended beyond March 31, 2009 tillSeptember 30, 2009 involving an additional financial outgo of Rs.500crore.

Government to recapitalize the public sector banks over the nexttwo years to enable them to maintain Capital to Risk Weighted AssetsRatio (CRAR) of 12 per cent.

Allocation for Defence increased to Rs 1,41,703 crore which includes Rs 54,824 for Capital Expenditure.


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on public projects along with RBI taking a number of monetary easingand liquidity enhancing measures.

Fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in 2007-08 to 6.2 per cent of GDP in 2010-09.

EFFECT ON SERVICE INDUSTRY:-

The market had high expectations from the Union Budget 2009-10,especially with the Economic Survey suggesting radical changes --

including review, phase out surcharges, cesses and transaction taxesand annual target of Rs 25,000 crore per annum from disinvestment of stake in PSUs for the next five years.

While Union Budget did remove Fringe Benefit Tax, markets foundthe hike in Minimum Alternate Tax from 10% to 15% a bigger irritant.

Also, contrary to market expectations, fiscal deficit is set to zoom to6.8% in the fiscal year 2009-10, up from 6.2% as per provisionalaccounts of FY 2010-09.

The markets were expecting inflows from auction of 3G spectrumauctions and the inflow from divestment of stake in PSUs to ensurethat fiscal deficit does not shoot over 6.0%. However, the budgetdocuments indicate that the deficit will touch 6.8% for FY 2009-10.

Similarly, revenue deficit is set to increase to 4.8% in FY 2009-10from 4.6% in FY 2010-09 .

He hike in Minimum Alternate Tax (MAT) from 10% to 15% is anirritant for the corporate sector. On the positive side, this hike hascome with a benefit of extending the period allowed to carry forwardthe tax credit under MAT from 7 years to 10 years.


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Also, the hike in MAT will not be 'earnings dilutive', but will only be'cash flow dilutive'. The increase in liability towards MAT will bematched by an incremental deferred tax credit.

Hence, the net profit or EPS of a company will not change due to hikein MAT from 10% to 15%. However, it will lead to an increase incash outflow and if the company is not returning to profits as per theIncome tax Act within ten years, then it may have to forego these.

So, from the current year's point of view, the increase in MAT from10% to 15% is not earnings dilutive but cash flow dilutive.

On the other hand, the removal of Fringe Benefit Tax (FBT) is a major positive for corporate India.

The finance minister has said that surcharge on income tax for individuals will be waived.

The finance minister has said that the budget proposals are revenueneutral as far as direct tax is concerned. This is so despite the fact thatthe exemption limit on personal income tax has been hiked by Rs15,000 to Rs 2.40 lakh for senior citizens.

Similarly, the exemption limit was hiked by Rs 10,000 each to Rs 1.90

lakh for women taxpayers and to Rs 1.60 lakh for all other categoriesof individual taxpayers.

As the minimum tax bracket is 10%, this means the benefit for senior citizens will be Rs 1,500 per annum and for others (including womentax payers) will be Rs 1,000 per annum. The benefit could be more,including the surcharge waived.

The Union Budget has increased the deduction under section 80 DD inrespect of maintenance, including medical treatment, of a dependentwith severe disability has been raised from Rs 75,000 to Rs 1 lakh (Rs100,000).

In a way, the biggest (maximum) and the largest (covering more people) beneficiary of the Union Budget 2009-10 is the salaried class.


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Their disposable income has been increased through hike in ITexemption limit and removal of surcharge.

The Union Budget has robbed corporates to increase disposable

income of individuals. As a result, while corporate taxes are expectedto rise by 15.6% to Rs 256,725 crore, personal income tax is expectedto fall by nearly 8% to Rs 112,850 crore in FY 2009-10.

Auto sector has to contend with the reduction in excise duty onvehicles that were left out in the three-stimulus package announced in2010-09.

The Union Budget 2009-10 has cut the excise duty for petrol trucks to8% from 20%. In addition, the ad valorem (duty by value) duty oncars and sports utility vehicles of engine capacity equal and above2,000cc has been reduced by Rs 5,000/unit to Rs 15,000, auguringwell for vehicle manufacturers.

In addition, the budget has further provided for a more level playingfield between road freight and other modes of transport (includingcoastal shipping and railways) by applying a uniform service tax rate.

This will reduce the incremental disadvantage in pricing faced by road

freight operators. Overall the Union Budget 2009-10 is marginally positive for the sector.

The Indian software industry has something to cheer from the Budget2009. The budget proposes to abolish FBT, which would mean lower cash outgo and lower administration hassles. Also, the budget

proposes extension of STPI scheme (sun-set clause) for one moreyear, i.e. for FY2010-11.

This would mean one more year of relief on the taxation front for theIT companies. The budget proposes to exempt the value attributable tothe transfer of the right to use packaged software from excise duty andCVD.


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Finally, the budget proposes to increase the MAT limit from 10% to15% and extend the period allowed to carry forward the tax creditunder MAT from 7 years to 10 years.

Though this would mean higher cash outgo due to taxes to be paidon higher tax rate, on an overall basis the impact on earnings would beneutral.

On the administrative side, the budget proposes set up of alternativedispute resolution mechanism to be created within the Income Taxdepartment for the resolution of transfer pricing disputes empoweringthe Central Board of Direct Taxes (CBDT) to formulate 'safe harbour'rules to reduce the impact of judgmental errors in determining transfer

price in international transactions.The budget proposes to continue with the stimulus package extendedin February, 2009 up to December 31, 2009 to the print media,comprising waiver of 15% agency commission on DAVPadvertisements and a 10% increase in the DAVP rates to be paid as a'special relief' subject to documentary proof of loss of revenue in non-governmental advertisements.

This will spell relief for the print media sector, which is reeling due toslowing advertising revenues. With the election season over, DAVPadvertising would begin and is likely to fill up some of the revenueshortfall created by the slowing economy.

However, the benefit would not be major as the share of DAVP of thetotal advertising revenues is 10-20%.

Looking at the opportunity and growth in rural sector, FMCGcompanies are now focussing on the rural region for their volume

growth.The focus on rural sector in the budget -- like increase in agriculturecredit flow to Rs 325,000 crore, allocation of loan to farmer up to 3lakh at the rate of 7%, and144% increase in allocation for NationalRural Employment Guarantee Scheme to Rs 39,100 crore -- will givethe required boosts to the FMCG industry.


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Along with it, an increase in teh exemption limit in personal incometax by Rs 15,000 to Rs 2.40 lakh for senior citizens; by Rs 10,000 toRs 1.90 lakh for women tax payers; and by Rs 10,000 to Rs.1.60 lakhfor all other categories of individual taxpayers, eliminating thesurcharge of 10% on personal income-tax, abolition of Fringe BenefitTax (FBT) and introduction of the Goods and Services Tax with effectfrom April 1, 2010 will the help the FMCG sector to continue itmoment for the FY09.

The paper sector didn't receive any much attention from the financeminster in the budget. However, the paper industry is thankful to thefinance minister for not increasing the excise duty, which was cut by600 basis points in the first two-stimulus packages to the current levelof 4%.The paper industry, which is suffering from low cost export, wasexpecting a rise in basic custom duty (BCD) from 10% to 15% on

paper/paperboards along with re-introduce component of specialadditional duty to save the domestic manufacturer.

The finance minister has not heard their request. The scrips to bewatch will be Ballarpur Industries (BILT), JK Paper, Tamil Nadu

Newsprint & Papers (TNPL).ENTERTAINMENT:- ( Customs duty imposed on STB at 5%)

The budget proposes to levy basic customs duty of 5% on Set-TopBoxes. This would be a negative for the cable and DTH operators whoare already reeling under losses on the back of higher customer acquisition cost as compared to revenue per customer.

In order to ensure balanced application of fertilizers to increase

agricultural productivity, the government intends to move towards anutrient-based subsidy regime so as to cover larger basket of fertilizerswith innovative fertilizer products available in the market atreasonable prices.

Besides, the government also intends to move to a system of directtransfer of subsidy to the farmers. The system of direct transfer of


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subsidy to farmers is laudable, but only if competition is allowedamongst fertilizer companies to price their products.

Here the problem arises due to substantial difference in cost of

production depending on the feedstock used, like natural gas,regassified LNG, naphtha, other alternate fuels etc. So, while it wasthe government which encouraged fertilizer capacity additions throughfeedstock other than gas, it cannot shy away from its responsibility.

Also, if Indian fertilizer production comes down and domesticconsumption continues to rise, the country may have to pay heavy

price of sharp spike in global prices and import in larger quantities atsuch high prices.

We have seen this in wheat, sugar, etc, and hope we shall not see it infertilizers. How the government achieves this remains to be seen.

Customs duty on rock phosphate was reduced to 2% from 5% earlier.Excise duty on naphtha was also reduced to 14%. Although the lower customs duty and excise duty on rock phosphate and naphtharespectively will enable the fertilizer manufacturers to reduce their

production cost, important issues like the timely subsidy payment,measure to attract new investment went unaddressed.

There was also no time slab announced within which the nutrient- based subsidy regime and the direct payment of subsidy to the farmersare implemented. Thus the budget was really a dull affair for thefertilizer sector.

PESTICIDES FEELS UNCARED FOR:-

Although Fringe Benefit Tax (FBT) was abolished, there was noclarity on the other demand of the industry body. The pesticidesindustry had requested for reduction in excise duty on pesticides from8% to 4%, besides lowering excise duty to 4% from the current levelof 16% for furnace oil.


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The industry had also requested for zero import duty for major fuelslike fuel oil, LSHS, coal, etc. None of these, however, materialised inthe budget.

Request for lower import duty on inputs and fuels for captive power plants and reduction of service tax was also denied. Thus, the budgetfor the pesticides industry is negative as far as immediate impact isconcerned.

In the Budget 2009-10, full exemption from 4% special CVD on partsfor manufacture of mobile phones and accessories has been proposedto be reintroduced for one year.

The proposal is positive for the telecom services industry as it willhelp in achieving the key objective of the government to ensure fastspread of affordable connectivity to the rural areas.

But whether the cost of mobile phones will come down is a moot point.

The finance minister made few announcements for the oil and gassector and one of the major ones was the extension of tax holidayunder Section 80 IB (9) for production of natural gas too.

The demand for deregulation of the oil sector, however, was notfulfilled. But the government set up an expert group to advise on aviable and sustainable system of pricing petroleum products.

The announcements made in the budget are marginally positive for thesector in spite of major expectations remaining unfulfilled.

Slew of initiatives for the oil and gas sector have been proposed in the budget. These include:

The government shall set up an expert group to advise on a viable andsustainable system of pricing petroleum products. Tax holiday under section 80-IB(9) of the Income Tax Act, which washitherto available in respect of profits arising from the commercial

production or refining of mineral oil, to be extended to natural gas. This tax benefit to be available to undertakings in respect of profits derived from the


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commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the NELP-VIII round of bidding. Thesection to be retrospectively amended to provide that "undertaking" for the

purposes of section 80-IB(9) will mean all blocks awarded in any singlecontract. The government shall prepare a blueprint to be developed for longdistance gas pipelines leading to a National Gas Grid to facilitatetransportation of gas across the length and breadth of the country. The outlay for Assam Gas Cracker Project stepped up suitably in B.E.2009-10. Excise duty on naphtha to be reduced to 14%. Duty paid High Speed Diesel blended with upto 20% bio-diesel to be

fully exempted from excise duties. The ad valorem component of excise duty of 6% on petrol intendedfor sale with a brand name to be converted into a specific rate.Consequently, such petrol would now attract total excise duty of Rs.14.50

per litre instead of '6% + Rs.13 per litre'. The ad valorem component of excise duty of 6% on diesel intendedfor sale with a brand name to be converted into a specific rate.Consequently, such diesel would now attract total excise duty of Rs.4.75

per litre instead of '6% + Rs.3.25 per litre'. Customs duty on bio-diesel to be reduced from 7.5% to 2.5% The steel industry was expecting an increase in import duty oncertain steel and steel products and was also hopeful of a hike inexport tax on iron ore. None of these two demands of the industry was met. However,focus on infrastructure is expected to provide indirect demand push. From a medium-term perspective, the government plans toincrease the investment in infrastructure to more than 9 per cent of GDP by 2014. Overall, with industry demands not met the Budget isneutral for the steel sector with a negative bias.


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The real estate sector looked up to to the budget with great hopefor measures to resurrect the housing demand. It had asked for increase in 80C benefit to Rs 3 lakh and of which 2 lakh exclusivelyfor principal repayment, extension of 100% deduction of interest on

payment for owner occupied house as well like rented house,extension of sunset clause u/s 10A and 10B, etc. While the extension of 10A and 10B benefits were granted for one more year, auguring well for commercial real estate -- especially,STPI space -- with no major change in tax benefits for investment inreal estate sector, the budget has not done any thing concrete toresurrect the demand for the realty sector.

However, removal of surcharge for income up to Rs 10 lakh (Rs1 million), increase in tax exemption by Rs 15,000 for senior citizensand by Rs 10,000 for women and other assesses will improvedisposable income. But this will largely be inadequate considering the current

property prices in urban centers and interest rates and will hardly beany incentive for pushing up demand for real estate sector.

Capital Goods :-( No clear measures to encourageinvestments) The increased allocation for central funded schemes such asAPDRP, Rajiv Gandhi Grameen Vidyutikaran Yojana has been goodfor the electrical equipment industry. On the flipside, the budget has not clearly spelt out any measuresto encourage private investment in infrastructure or the manufacturingsector.

Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) to becontinued during the Eleventh Plan period with a capital subsidy of Rs28,000 crore. Allocation of Rs 5,500 crore for 2010-09. Corpus for the Rural Infrastructure Development Fund (RIDF-XIV) to

be raised in 2010-09 to Rs 14,000 crore, with a separate window for ruralroads.


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Increase in short term capital gains from 10 per cent to 15 per cent. Change in treatment of securities transaction tax (STT) from rebate toan expenditure.

Impact on sector :- No relief to the infrastructure financing sector in terms of tax rates. Infrastructure financing companies to benefit under the public private

partnerships proposed under various infrastructure schemes. The corpus for the Rural Infrastructure Development Fund will facilitate such PPP projectsin the rural segments as well. Companies that finance rural electrification will benefit from theadditional subsidy offered to RGGVY.

Impact on companies :-

Rural Electrification Corporation will benefit from the additionalsubsidy offered to RGGVY. IDFC to benefit from private participation in infrastructure projects. HDFC to benefit from the subsidies offered to rural housing due to thecompanys focus on the same.

Broking firms like Indiainfoline, India Bulls to be impacted byreduction in trading volumes arising out of higher short term tax. Treatment of STT is expected to impact brokers especially those whoare involved in proprietary book trading and arbitrage. Overall volume inthe market can be impacted due to reduction in volmes and can thusincrease impact cost

BUDGET IMPACT ON SERVICE TAX:-1.Threshold annual exemption limit:

The threshold limit for small service providers has beenincreased from Rs.800,000 to Rs.10,00,000/- Amendment shall come into effect from April 1, 2010


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being treated as sale of goods, is treated as service, thereby chargeableto Service tax under this head

Internet telecommunication servicesIn the budget of 2007-08, six separate taxable services,

related to telecommunication were merged into single taxable service,viz., Telecommunication service

Telecommunication services are also provided throughinternet, which would be covered under Internet telecommunicationservices

This will interalia include, internet back bone services(including carrier service of internet traffic by one Internet ServiceProvider (ISP) to another ISP, internet access service

2. Amendments in existing services:

Foreign exchange broker service:To include purchase or sale of foreign currency, including

money changing, by an authorized dealer or an authorized moneychanger under banking and other financial services

To include purchase or sale of foreign currency, including

money changing, by an authorized dealer or an authorized moneychanger under foreign exchange broker services provided by anindividual

Cargo handling service:To include packing together with transportation of cargo or

goods, with or without one or more services like loading, unloading,unpacking

Tour operator services: -To include services provided in relation to a journey from

one place to another, in a contract carriage vehicle

Business auxiliary services:-To omit, reference to information technology service


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3. Others:

Time limit for filing revised returns increased from 60 days to 90days Monetary limit on self adjustment of excess service tax paid,increased from Rs. 50,000 to Rs.100,000/- General penalty upto Rs. 5,000, in case of any contravention of any of the provisions of the CENVAT Credit Rules, 2004

4.Service Tax Dispute Resolution Scheme, Scheme applicable for resolution of dispute relating to Servicetax arrears pending as on March 1, 2010 For amounts not exceeding Rs.25,000/-

CONCLUSION:-

After this study than get a conclusion that the present the pre budgetaand also get the budget analysis india, budget analysis 09-10, budget analysis examples, budget analysis book, budget analysis

techniques. Here we give the details of budget analysis course, budgetanalysis definition, budget analysis examples, budget analysisexperience, budget analysis format.Finance minister Pranab Mukherjee will present the Union Budget for 2009-10 to Parliament in July first week. The budget text is not aspeech of financial records; it is also a agreement of the governmentcost-effective policies. The government will give focused on flowing:

1. Agriculture2. Rural Development3. Internal Security4. Primary Education5. Industry Growth6. Natural Resource


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While making of budget so many surveys and analysis is doing like pre budget survey, Industry key persons meetings, differentgovernment departments head & important persons seat together,

financial organizations talk, in that way the budget is making.

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Buget 2009 Evaluation on Service Industry

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