The interim budget presented by the acting finance minister Pranab Mukherjee had a clear focus on social sectors. Conversely, the amplified spending on rural job guarantee scheme, education and the midday meal scheme will take a huge toll on the country’s fiscal deficit, currently budgeted at 5.5 per cent of the GDP during 2009-10.

However, the recession-hit India Inc demonstrated disappointing sentiments as the anticipated CM specific tax sops failed to be delivered in the interim budget with no changes in direct or indirect taxes.

In view of this, all eyes are now set on the forthcoming budget. The country is now waiting to see how the newly elected government braces up to its first decisive challenge.

The changes in the direct and indirect tax arena that may make a positive impact on the CM segment would be:

* CST rate may be reduced to 1 per cent to pave way for introduction of National GST in 2010

* Excise duty rate should be continued at 8.24 per cent to continue the growth

* Exemption of ADC on goods imported (instead of refund) for further resale to cut down on compliance cost and remove administrative hassles

* The Customs Act presently provides that imported goods can be kept in a bonded warehouse for a period of one year. However, interest on customs duty is chargeable on such goods if the same are not cleared within 3 months from the warehouse. It is suggested that warehoused goods should be allowed to be kept in-bond for a period of at least 6 months without payment of interest

* Education cess (including higher secondary education cess) to be computed on the countervailing duty (CVD) and then further being computed on the sum of CVD (including education cess) and basic customs duty (BCD). It is submitted that the said computational method entails a tax on tax situation. It is suggested that CBEC clarifies the manner in which education cess should be computed. Further, legal anomalies and ambiguities in this regard should also be clarified/removed

* Service tax on the renting of immovable property (shops/warehouses) entails bottleneck which cannot be reclaimed by the retailers. It is submitted that specific exemptions should be provided for traders/whole-sellers/retailers

* Lower custom duties on food products and raw materials for food products (e.g. confectionery products, frozen foods, preparation for infants etc)

* Tax incidence on account of excise and VAT on food products like tea/coffee pre mixes, vending pre mixes should be lowered

* Extend tax holiday to all units engaged in export of food products (post processing of such products)

* Promote food processing zones in SEZ – earmark specific areas for food processing activities in SEZ to promote the sector