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Mukherjee Hints At Budget U-Turn

by Mary Swire,, Hong Kong

21 March 2011

There are always going to be unpopular proposals in any budget, however the Indian Finance Minister, Pranab Mukherjee, has indicated that he will review some of the more contentious tax changes announced on February 28.

"Since the presentation of the Budget 2011-12, I have received several suggestions and representations, including feedback from Members on taxation proposals. These are under examination," Mukherjee said during recent budget discussions in the lower house of parliament.

The two most likely to be revisited are the imposition of service tax on healthcare, and the proposal to levy an 18.5% minimum alternate tax (MAT) on special economic zones.

Sources have suggested that the 5% levy on health diagnostics will be dropped following pressure from doctors, hospitals and members of the Congress Party. The Federation of Indian Chambers of Commerce (FICCI) had appealed for the tax to be rolled back as it believed that it would compromise quality and safety measures. There are also expected to be changes to the proposed 5% tax on treatment in centrally air-conditioned treatment centres with more than 25 beds.

The MAT on special economic zones has received widespread criticism from the business world, and one of its most vociferous critics has been Mukherjee’s colleague Rahul Khullar in the Ministry of Commerce and Industry.

The Finance Minister’s direct tax proposals for 2011-12 have been estimated to result in a revenue loss of INR115bn (USD2.55bn), while the proposals for indirect taxes are expected to yield an additional INR113bn. Mr Mukherjee is likely to make further announcements on March 22.

TAGS: tax | business | India | tax incentives | budget | corporation tax

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