Even before he spoke a word of his Budget 2010 speech, Finance Minister Pranab Mukherjee's place in the immediate economic history of the country was reserved. A glimpse of that history came a day before the Budget presentation when the minister was seen in Parliament flashing the report of the 13th Finance Commission.
The 478-page report proposes- complete with action plan-an all-new economic order for the country. Then, there is the Goods and Services Tax (GST), the proper implementation of which will mark the biggest tax reform in six decades making both government and India Inc. richer. For the people, there is the Direct Tax Code, which-with amendments-promises to bring as sweeping a change in direct taxes (income and corporation tax) as GST will in indirect taxes. It could well be that Mukherjee didn't plan the convergence of these big changes and it's a mere coincidence that is thrusting greatness upon him.
We will keep the debate on the Finance Minister's economic acumen for later. Right now is the time to understand the implications of the great changes in the economic landscape that lie ahead. A set of randomly chosen facts listed above gives you a snapshot of the magnitude of change in the offing.
We have explained in greater detail what the four pillars of the emerging new economic structure really are in the following articles:
THE [OLD] ECONOMIC ORDER
THE [NEW] ECONOMIC ORDER
|Average cumulative burden of all indirect taxes: 22%||Average cumulative burden of all indirect taxes: 10-12%|
|Companies deal with tax laws and officials of up to 28 states||One tax law and system across India|
|Dozens of different taxes and several products taxed at different rates in different states||Only two tax rates, one for the Centre and another for all states, applicable uniformly|
|Individual income above Rs 5 lakh a year taxed at 33%(including cesses)||Individual income above Rs 25 lakh taxed at 30%|
|Tax saving investments of up to Rs 1 lakh allowed every year||Tax saving investments of up to Rs 3 lakh allowed every year|
|Over 100 crore man hours and Rs 3,35,000 crore lost in tax compliance||Substantial reduction in time and money spent on tax compliance and dispute resolution|
|As a market, India is fragmented and therefore weak||A strong common market with free movement of products and services|
|India is one of the fast-growing economies, but one of the toughest places to do business||India is one of the largest global economies, and easier to do business with and in|