1. What is a cess?
Cess is a type of tax. Its receipts are generally kept aside for a particular purpose. For example, Education Cess is levied and all the collections under this cess are used for the purpose of education only.
2. What is Tax Collected at Source?
Tax Collected at Source is income tax collected by the seller from the buyer, on sale of certain specified goods. For example, if purchase of an article worth Rs. 150 is liable to TCS at 2%, the seller will also charge Rs. 3 (in addition to Rs. 150) from the buyer and deposit it to the govt. There is a major difference between Indirect taxes like VAT, service tax etc and TCS. While indirect taxes are primarily a liability of the seller which he recovers from the buyer, TCS is the liability of the buyer himself. The seller just acts as an agent collecting the tax from buyer and depositing it to the govt.
3. What is a bond? What are tax-free bonds?
A bond is a document which shows indebtedness of a company, govt, municipality etc. A person buys a bond on an entity (govt, company etc) for a fixed amount for a fixed period. He gets interest on that amount over the period of the bond, after which, he surrenders the bond back to the entity and receives the original amount back. E.g. You can buy a 2-year bond of govt of Rs. 1000 at interest rate of 4%. For 2 years, you will receive interest at 4% per annum on your Rs. 1000. After the period expires, you can surrender the bond and recover your Rs. 1000. So, in simple terms, bond is just a form of borrowings made by an established entity.
Generally, the interest received from bonds is liable to tax. But to encourage people to buy bonds related to some special sectors (which are very crucial to the economy), the govt may introduce tax-free bonds. On these bonds, the recipient of interest does not have to pay any tax.
Highlights of the Union Budget 2016 for Roads, Transport, Forests and Environment sectors-
- The total allocation to the Ministry of Road Transport and Highways is estimated to be Rs. 57,976 crores. This is an increase of 23.07%, compared to the revised estimates of 2015-16.
- The govt aims to approve 10,000 km of road projects. At the same time, 10,000 km of road construction is estimated to be completed, which will generate 4 crores man-days of employment.
- National Highway Authority of India (NHAI) will issue (sell to public) tax-free bonds worth Rs. 15,000 crores. The allocation to Pradhan Manri Gram Sadhak Yojana (PMGSY) is Rs. 19,000 crores. States and UTs will also contribute Rs. 8,000 crores to PMGSY to ensure connecting 65,000 habitations to roads. Central govt has also allocated Rs. 55,000 crores to construction of roads and highways. So, total expenditure on construction of roads and highways, including PMGSY, is estimated to be Rs. 97,000 crores.
- State Highways covering 50,000 km are expected to be upgraded to National Highways. At the same time, there are projects, covering 8,300 km and involving Rs. 1,00,000 crores, which are stuck due to various reasons. Govt expects to re-start 85% of such projects.
- Total expenditure on roads and highways, along with capital expenditure on railways, is estimated to be Rs. 2,18,000 crores.
- Amendments in Motor Vehicle Act will be carried out to open road transport sector for private bodies in the passenger segment.
- Tax-free bonds worth Rs. 800 crores are also planned for waterways. The govt has also permitted other bonds by NHAI, NABARD etc, valuing around Rs. 31,300 crores.
- Govt has eased taxation on the cargo shipping industry.
- Excise duty on Aviation Turbine Fuel (ATF) is increased from 8% to 14%. Revival of 160 un-served and under-served airports is being considered.
- Infrastructure Cess of 1% (on small petrol, LPG and CNG cars), 2.5% (on diesel cars not exceeding 4 metres in length and engine capacity up to 1,500 cc) and 4% (on all other higher engine capacity cars, including SUVs and sedans) is levied. The govt expects receipts of Rs. 3,000 crores from this cess in 2016-17.
- Tax Collected at Source at 1% is levied on purchase of luxury cars, worth more than Rs. 10,00,000.
- The allocation to Ministry of Environment, Forests and Climate Change is Rs. 1,143 crores, which is a hike of 14.87% from the last budget.
- Finally, the government is focusing on core-sectors like infrastructure. The boost to roads and highways is a wonderful step which will help all the sectors, directly and indirectly.
- These steps will generate massive employment and demand of core-products like cement, high-tech infrastructure equipments etc, which are a big help to the economy.
- Amendments in Motor Vehicle Act will provide better connectivity and services to the public and also generate jobs.
- Port Sector will improve with the measures taken in the budget. It must be noted that, the sector will also be benefitted immensely from the enhanced connectivity with upgradation of State Highways and National Highways.
- Increase in excise duty of ATF will harm the airline sector. ATF is the single largest input cost item for airlines. Increase in excise will erode the benefit of 25%-30% fall in ATF prices over the last year and result in higher airfares. I believe that we need to help the airlines sector as it represents massive opportunities for growth and development. It helps the economy by cutting down distances, travelling time and generates a large no. of jobs.
- Infrastructure Cess on cars running on cleaner and efficient fuels like CNG and LPG is inexplicable. The timing of the imposing this cess is also debatable as automobile sector is struggling at the moment. However, I do not foresee any impact on pollution levels due to this cess.
- The allocation to Environment and Forest ministry is drastically low. With construction of roads and highways, a large amount of green cover will be damaged. Replenishing the same is must. When the govt is spending so much on irrigation, growing and protecting trees (to ensure better rains and protection against natural disasters) seem obvious. At the same time, India made huge promises in the Paris Climate Summit last year, including increasing its forest cover to 33%. Considering the allocation to the ministry, this seems impossible.
We hope you liked this article. If you have any questions, please do ask via comments. We will be very happy to get back to you with all the answers. Our next article will focus on steps taken for Health, Education, skill development and job-creation. Happy learning!