Budget 2007-08

Impact on
Individual &
Economy
Varun Sharma
Dual C
 Budget & Individual
Income Tax Men 110K
Women 145K
Senior citizen 195K
Oil/Instant Oil/Idlis/Dosa Duty
food/pure water reduced
Packed food cheaper for you and 30% to
your pet 20%
Biscuits priced <50/Kg Tax
Exempted
Personal Foot wear- Ex Duty halved (16%-8%)
accessories Umbrellas (12.5%-
5%)
Watch Components (12.5%-
5%)
Tobacco/Non Mouth Freshners 66%-45%
tobacco masala Cigarettes,excise duty raised 5%
 Budget

Polished Custom’s Duty cut 5%-3%

Diamonds

Medical General Population 15K

insurance
Senior citizen 20K

Min Alternate Extended to IT companies 11.3%

Tax

Cess/ Secondary & higher Education 1%

Service tax Service tax exemption limit 4Lak – 8

raised for small service lak
providers
Custom duties Non agricultural products 12.5-10%
slashed
 Budget & Economy
COLD-SHOWER BUDGET
Designed to snap the country out of the euphoria induced by rapid growth

Gross tax revenue Slowest growth rate for next 5 yrs 17%

Total Expenditure Growth rate 10%

These no’s assume GDP will grow at a slower rate from 15%(nominal) to 13
%
Fiscal deficit Decreased by 11% (3.7-3.3)%
of GDP

Tax Collection Dec in Income Tax

Dec in Custom duties

Additional education cess

Inc in dividend tax

NET ADDITIONAL TAX Rs 3000 Cr

 Budget & Economy

Programs for
Agriculture development

Education

Health care

Infrastructure-oriented Bharat

SME nirman
Package incentives
Extension limit raised(Excise duty) 1Cr to 1.5 Cr
Reform Debt Management office for Govt
Treasury
Infrastructure Speeding of NHDP
Duties & Taxes
 Direct Tax

DIRECT TAXES

Corporate tax All firms and Co’s with taxable No

income of Rs1 Cr or less surcharge
MAT Extended to IT and co’s under
sec10A&10B
Divident For dividends distributed by Co 12.5%-15%
distribution tax For money market mutual funds 12.5%-25%
J&K Tax holiday extended to march 2012

ESOPs Brought under FBT(fringe benefit tax)

Service Tax
 Service tax collections for 2006-07 exceeded
the target of Rs 34,500 crore by 10 per cent,
with the revised estimate amounting to Rs
38,169 crore.
 ST=0.93% of GDP
 Plans a hike of 32% to Rs 50,200Cr by 2007-08
 Total ST 12.36%
 Another seven services have been brought
under the service tax net this year, taking the
total number of services that are taxable to
106.
Custom duty
 Duty cut to 10% to meet industry
expectations, move against
inflation
 Customs collection =Rs 98,770
crore,
 20 per cent more than estimate.
 The cut comes at a time when
Customs collections had risen by
33.8 per cent in the April-
 Service Tax/Customs duty

Small Service 4Lakh-8

Providers Exemption limit raised lakh
Extended to Services outsourced for mining of
minerals,oil or gas and commercial
Customs duty rentals
Peak Rate For Non Agricultural Products 12.5% -
Slashed 10%
Duty Reduced For most chemicals and plastics 12.5%-
Food processing machinery 7.5%
7.5%-5%
15 specific machinery used by 155-7.5%
pharmaceuticals
Duty imposed Private importers of aircraft & 3%
helicopters
Iron ores and concentrates Rs
300/tonne
Excise duty
 Central government fell short of its excise duty
collection estimate by 1.45 per cent.
 Estimate = Rs 1,19,000 crore,
 Collected= Rs 1,17,266 crore.
 Excise collections increased to Rs 1,30,220 crore,
 11.04 per cent hike over the revised estimate.
 Contribute by oil and gas sector= Rs 1,05,558 crore
 An increase by 10.81 per cent
 Tax-GDP ratio is set to increase to 11.8 compared with
11.4
 1% duty levied on pan masala for National Calamity
Contingent fund has also been extended to polyester
filament yarn, motor car, two-wheeler and multi-utility
vehicles.  
 Expected contribution= Rs 2,140 crore as against Rs
 Excise Duty

Duty Exempted Biscuits costing less than 50/Kg

Biodiesel
Food mixes/instant mixes

Duty Raised Cigarettes 5%

Biris(non machine) 7-11/thousand
Biris(machines) 17-
Dual Duty For bags priced Rs 190 or less 24/thousand
Rs 350/ tonne
For bags priced > Rs 190 Rs 600/tonne
Reform
Education
 Allocated Rs 7,324 crore for mid day
meal
 Extended to upper primary classes in
3,427 educationally backward blocks.
 Rs 50 Cr for Vocational Education
mission-for trained man power for
sustaining growth 
 Rs 750 Cr for scholarships under Sarva
Shiksha Abhiyan
Budget &
industry
Cement
 Duty will be cut from Rs 400 per tonne to Rs 350 per tonne if cement
is sold at Rs 190 per bag.
 The Context
 WPI weightage 1.73 per cent
 Inflation levels witnessed= 10-15 per cent
 Cement prices in the domestic market have moved up by 30-40 per
cent over the past one year to Rs 210 (50 kg bag).
 The Impact
 Increase prices to offset the loss on account of higher duties.
HOTEL
 Five-year income tax holiday to 2/3/4-star hotels &
convention centres with seating capacity >3000 for NCR
 Tourist infrastructure = Rs 520 cr from Rs 423 cr.
 The context
20,000 rooms are required for Commonwealth Games
 The impact
Hotel industry
 Disappointed as the tax holiday is restricted to 2/3/4-star
hotels in the NCR..
Irrigation
 Outlay for irrigation projects increased by 54% to. Rs
11,000 crore
 35 projects to be completed
 9,00,000 hectares of land to be brought under irrigation.
 Transfer of Rs 1,800 crore to the National Bank for
Agricultural and Rural Development
 Water management schemes
 Renovation of water bodies
 Rs 40Cr for rain water harvesting
Agriculture
 Total allocation =Rs 8,558 crore
 15.7 per cent higher than last yr
 Agricultural research and education outlay=Rs 1,620 cr
 13 per cent increase
 Certified seeds production to be doubled in 3 yrs
 Facilitation of technology transfer to farmers=Rs 230Cr
 National Agricultural Insurance Scheme =Rs 153 crore
(aimed at helping farmers to keep high-yielding milch
animals)
 FMCG Industry
 Packed biscuits of maximum retail sale price (MRP) not exceeding
Rs50 per kg fully exempted from excise duty.
 Excise duty on food mixes (including instant food mixes) fully exempt
from excise duty.
 Customs duty on food processing machinery has been reduced from
7.5% to 5%.
 Crude as well as refined edible oils exempt from the additional CV
duty of 4%.
 Customs duty on crude sunflower oil has been reduced from 65% to
50% and on refined sunflower oil from 75%to 60%.
 A Special Purpose Tea Fund launched for re-plantation and
rejuvenation of tea. Similar financial mechanisms to be announced for
coffee.
 Excise duty on parts of footwear reduced from 16% to 8%.
Infrastructure
 National Highway allocation increased to Rs126bn from
Rs99.55bn
 Allocated Rs40bn for rural roads
 Additional 2.4mn hectares of irrigated area to be created
by FY08
 Outlay for accelerated irrigation benefit programme at
Rs110bn
 Scheme to use forex reserves for infrastructure
development
 Mutual Funds allowed to launch dedicated infrastructure
funds
Steel
 Custom duty unchanged at 5% on prime steel - On expected lines
 Custom duty on second and defective steel reduced from 20% to 10%
 Custom duty fully exempt on all coking coal imports irrespective of
the ash content – No impact for steel manufacturers as almost all of
them import coking coal of <12% ash content with respect to which
the import duty was already 0%.
 Imposition of export duty of Rs300/MT on iron ore – Negative for
Sesa Goa (Not Rated) but Positive for nonintegrated steel
manufacturers.
 Imposition of export duty of Rs2000/MT on chrome ore – Negative
for Rohit Ferro (Not Rated) but positive for stainless steel
manufacturers.
IT/Software
 Non-extension of STP benefits beyond 2009 - Negative especially for
all smaller & medium sized IT companies which will be forced to find
relief under the SEZ scheme now.
 MAT @ 11.2% on adjusted book profits extended to income u/s 10A
& 10B –
 Inclusion of ESOPs under the FBT net (rate & method of calculation
not disclosed) - Negative for all players.
 Higher education allocation by 34.2% to Rs32,352cr - Positive for IT
education companies like Educomp
Revenue & expenditure
 Revenue
 Tax collection to grow 16.73% to Rs 404K Cr from
Rs345K Cr for current fiscal yr
Next Years revenue source
TAX Growth (%)
Customs duty 20
Corporation tax 14.95
Income tax 19.71
Excise duty 11
Service tax 31.5

Overall revenue receipts =Rs 4,86,422 crore

Overall revenue receipts growth=14.9 per cent (Rs 63,091 crore),
 Capital Expenditure
 Total capital expenditure=Rs 82,621 cr
 10.35 per cent higher (74,870 Cr)
 Capex budgeted for the defence ministry =Rs 41,922 crore 21.66 per cent
higher (Rs 34,458 crore.)
 Capex by the home affairs ministry =Rs 4,667 crore ,a 50% increase

Capex 2007-08 2006-07 Growth(%)

Defence 41922 34458 21.66
Home Affairs 4667 2040 56
Railway 6886 7850 -13
Power 1010 1061 -5
Urban Dev 2053 1481 39
Space 1581 475 69
Atomic 4420 3511 26
Energy
Road 5929 5027 18
Fiscal Deficit
 Fiscal deficit is 3.7 per cent of GDP(Rs95K Cr)
 Projected deficit 3.3 percent of GDP
Impact
 FMCG Market Size=Rs 35112 CrPre-Budget Post-Budget

1400
1200
Share price

1000
800
600
400
200
0
ITC Nestle Godfrey Phillips

PPOPOSALS IMPACT
• Taxes for cigarette
• Excise duty hike on cigarettes
companies to rise
• Excise duty cut on packaged marginally
foods and biscuits • Food processing companies
 Agriculture Market Size=Rs 33359.51 Cr
Pre-Budget Post-Budget

1400

Share price
1200
1000
800
600
400
200
Monsento Jain irrigation Tata chem

PROPOSALS IMPACT
•Higher agriculture growth
• Increased area under
• Increased income for
irrigation
farmers
• Excise duty cut on water
pipes and irrigation systems
 Cement Market Size=Rs 18300.43 Cr

Pre-Budget Post-Budget

1000

Share price
800

600

400

200

0
ACC GACL India
PROPOSALS
IMPACT
•Lower excise duty for cement
• Pressure on sales and
below Rs 190 a bag
margins for cement players
•increase in excise duty for
cement over Rs 190 a bag
 Steel Market Size=Rs 91116.06 Cr

Pre-Budget Post-Budget

1000

Share price
800

600

400

200

0
JSW Essar Tata Sail

PROPOSALS IMPACT
• Domestic steel players will
• Export duty levied on iron ore
benefit in sourcing ore
• No import duty on coking coal • Smaller players to pay less
for raw material
• Import duty cut on seconds
and defectives
 IT Market Size=Rs 42200.21 Cr
Pre-Budget Post-Budget

2000

Share price
1500

1000

500

0
Infosys Satyam TCS Wipro

PROPOSALS IMPACT
• Margins of software export
• Minimum Alternate Tax ambit
firms to suffer
to cover certain zero-tax
companies
• ESOPs under fringe benefit tax
 50-50 budget
+ive -ive
 Fiscal deficit under control  Efforts to manage cement prices.

 Infrastructure spending increased  Removal of 80IA benefits for

across the board. construction companies.

 Reduction in peak customs duty  Partial removal of tax exemptions

from 12.5% to 10%
for several sectors-IT,
pharmaceuticals.
 Increase in spending on education
and healthcare.
 Dividend distribution tax increased
from 12.5% to 15%
 Extended TUF scheme for textile
companies.
Thank you