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Budget 2009: No major tax changes?
June, 19th 2009

The Budget exercise is at its peak and there are indications that the government may not tinker with indirect tax rates, despite inflation slipping into the negative territory.

Finance Minister Pranab Mukherjee appears to be in no rush to roll back excise and service tax rate cutsall done to stimulate the economy.

The logic perhaps is that the government may be still in the wait and watch mode.

Finance Secretary Ashok Chawla said, The government had cut excise duty by an additional 2 per cent and had also lowered service tax rates by 2 per cent on February 16.

However, last month the finance ministry wrote to the PMO suggesting there should be an exit strategy to help roll back the excise and service tax rate cut.

Both these cuts are estimated to cause a revenue loss of over Rs 29,000 crore.

According to sources the government may review these rates only around September-October by when the picture on the economy is clearer.

Well, basically the government is caught in a cleft on taking a call between a negative inflation rate and an economy, which is yet to show a robust sign of revival.

From this perspective, it is but logical that the government would prefer to be cautious in tinkering any of the tax rates and this would also give industry and consumers enough cushion to completely overcome any impact of the economic slowdown.

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