Farmers’ stir impacted levy of agricultural cess in Budget: Tax expert

By Sumit Saxena
New Delhi, Feb 1 : The ongoing farmers’ protest had an impact on the Union Budget as Finance Minister Nirmala Sitharaman announced a cess for agriculture infrastructure and development, instead of a Covid cess, said Ved Jain, a specialist in direct taxes and former president, The Institute of Chartered Accountants of India.

Speaking to IANS on the Union Budget, Jain said an agricultural cess instead of a Covid cess is a matter of political compulsion. “In a democratic set up, I believe economy cannot be absolutely divested from political compulsions. Definitely, this farmers’ issue was one of the top agenda and the farmers’ agitation is one of the challenges before the country,” said Jain.

He said that the farmers’ agitation introduced the agriculture cess, but there are indirect taxes and the common man will be paying for it.

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“One of the best options (before finance minister) was to levy Covid cess, but she did not opt for it, rather opted for agricultural cess. Covid was nine months old and the farmers agitation was three months old. So, it was nascent and the priority… at the end of the day it is a way of raising resources,” added Jain.

Elaborating on the aspect of the agricultural cess, Jain said the government has succeeded in achieving two things with a single action — first raising resources and the other demonstrating to the people that the government is also taking care of them.

He added that the Finance Minister has taken a bold initiative not to curtail expenditure in view of the shortfall in revenue and has gone ahead with total expenditure and taken a big hit on the fiscal deficit with 9 per cent plus in the current year and 6 per cent plus in the subsequent year.

“When a lot of expenditure from the government takes place, obviously employment may be generated and at the same time, there may be a cause of concern that inflation may walk in and interest rate may go up because when the fiscal deficit goes up when there is more borrowing… the common man may suffer due to inflation,” said Jain.

However, he added that in the backdrop of the Covid-19 pandemic, a lot of people have lost jobs and the Finance Minister has taken a calculated gamble on this aspect.

Jain said one of the directions of the Budget was not to levy any new taxes and the finance minister may have wanted to push for expenditure and prop up the economy and see if it helps in generating employment.

He emphasised that the Union Budget looks good for the Indian economy, but fiscal deficit which has been quite high in 2021 and will continue in the next two and three years, but not at this level, may pose a challenge to India on the issue of debt. The servicing of this debt will also become a challenge for the government.

“Interest rate and inflation may not go up, which may make India a bit unproductive… but given the push for expenditure on infrastructure the prop-up in the economy may be able to generate so much demand and supply, which may overcome the difficulties of inflation and interest rates,” added Jain.

(Sumit Saxena can be contacted at sumit.s@ians.in)

–IANS/
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