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Budget Reaction 2018: Small Businesses Will Be Immensely Benefited, Says Vipul Jhaveri, Managing Partner-Tax, Deloitte, India

"The effective tax rates will go up possibly by half percent. So tax rates have gone up rather than going down other than those of small businesses," says Vipul Jhaveri

In an exclusive interview with BW Businessworld, Vipul Jhaveri, Managing Partner-Tax, Deloitte Haskins & Sells, shares his views on the Budget introduced on February 1st. Edited excerpts:

There will be a BW Report Card – On a scale of 1 to 10, how do you rate the budget?

I would say 6 from an overall perspective. But again it depends on which perspective one sees. If you see it from the corporate side, particularly the growth drivers and wealth creators, I would probably put it down to 6. That also reflected in the stock market. So far as the smaller businesses are concerned, certainly they would rate it higher. This is because they are going to benefit as statistics say 99% of them are going to benefit with a lower rate of tax translating to 5% of their savings.

Certainly, it is good for the agricultural sector, particularly those at the bottom of the pyramid. They would probably rate it high. One would expect that with the usage of Aadhaar to minimize the leakage out of that, the intended spends will reach the target. From their perspective, we will rate it 8.

Is the employment issue adequately addressed in the Union Budget?

With the way the proposals have been presented, it would appear that the expectation is that the job creation is achieved. But who create jobs? Whether it is the government or the Small and Medium sector is not clear. There is very little from the point of view of large businesses. If they are not going to expand, there is not much scope for them to increase employment. Job Creation can happen but who will create it is a point.  

Is the rural distress/ agriculture crisis adequately addressed in the Budget?

Again, what seems to have caused the crisis is not much from the production side. This last data has shown that there has been record production of crops. What they are really addressing is the go-to-market (strategy) for farmers and how do they get the value for their produce. So it is more of a market approach causing the agri distress which has been addressed to an extent. Now, digitization, creating these e-markets and platforms for them apart from giving some tax incentives to corporatization of their distribution channels, which until was available only to the cooperatives, should help. So yes, it should alleviate (the stress) to some extent. Most of these are policy measures and their implementation has to be seen. It also depends on the execution and the monitoring of those policies. 

Do you think it is a populist budget?

I won’t say it is a populist budget but addresses the concerns of people at the bottom of the pyramid. Populist, in my view, is something when the government gives out doles. It is not as if freebies have been given. It is addressing that segment of the population which needs that help. It is like creating opportunities for them and enabling them to create money and income as opposed to give free money. 

What are the downsides and what were your expectations?

I think it is not going to incentivize or create that dynamism from the large corporate to make these investments. Their ability to raise money by them from the stock market will also get slightly dampened in the near term. From their point of view, maybe they will wait and watch. I would have expected that something had to be done on account of reduction in the corporate tax rates which have not happened. Infact, it has gone up marginally through 1% surcharge. The effective tax rates will go up possibly by half percent. So tax rates have gone up rather than going down other than those of small businesses. That is something which I would have not expected. The long-term taxation rationalization is also conceptually a good idea. But the timing I am not supportive of.

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