Mumbai: Finance Minister Pranab Mukherjee is likely to hike excise duty in the Budget in a calibrated manner and cut withholding tax for interest payments by FIIs for long-term infra bonds. Sources say that the Finance Minister is likely to move on excise duties in order to tackle the fiscal deficit pressures, especially considering the fiscal deficit for FY12 might go up by almost 1 percentage point, that is to around 5.6 per cent or so. The pressures would be even higher next year with growth at 7.6 per cent.
The disinvestment revenues could moderate if the market, like this year, does not support the disinvestment agenda. Also, the high subsidies going forward next year would have an impact.
Sources from the Finance Ministry told CNBC-TV18 that some action on the excise front is expected. But we will have to wait and see tomorrow to find out if it's an across-the-board excise hike to 12 per cent or a hike on selective items like diesel cars.
On the brighter side, sources say the Budget is likely to be positive for investors, especially for new investors. The government will probably introduce the Rajiv Gandhi Equity Scheme which will give incentives for new investors.
There also could be an increase in the limit for tax free infra bonds from Rs 30,000 last year to Rs 50,000. These are issued by NHAI, Indian Railway Finance Corporation etc.
Also on Viability Gap Funding (VGF) you will see 10 new items being added.
The big idea for the Budget is the introduction of a negative list for service tax. Of course for the final contours we will have to wait for tomorrow and listen to the FM speech.
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