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Welcome to UPA's New Economic Order

How Budget 2010, the new Direct Tax Code and the GST are set to change the economic life of every Indian.

Print Edition: March 21, 2010

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 statesOne tax law and system across India
Dozens of different taxes and several products taxed at different rates in different statesOnly 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 yearTax 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 complianceSubstantial reduction in time and money spent on tax compliance and dispute resolution
As a market, India is fragmented and therefore weakA 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 businessIndia is one of the largest global economies, and easier to do business with and in

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