PC's seventh Budget: Expert reactions

MIXED REACTIONS: FM's please-all Budget did leave a few not-so-pleased after all.

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Gyanendra Tripathi, Associate Director, Global Tax Advisory Services,

Ernst & Young: General CENVAT rate reduced from 16 to 14 pc and a rate reduction in CST are steps taken in the right direction for the introduction of GST by the year 2010.

A mixed reaction was expected from the software industry with an increase in excise duty from 8 to 12 pc on packaged software and similar announcement of levy of service tax at 12 pc on customised software – the only silver lining is that of neutralizing input CENVAT and possible refund to exporters.

The key focus appears to be on service tax, with several changes proposed: threshold limit of exemption increased from Rs 8 to Rs 10 lacs per year and this will be a welcome move for small and medium service providers.

Utkarsh Palnitkar, Partner & Industry Leader, Health Sciences Practice, Ernst & Young: It is heartening to note the growing emphasis on life sciences in Budget declarations over successive years. Budget 2008-09 laid tremendous emphasis on health, agriculture and the social sectors as is evident in the initiatives announced. The life sciences sector, particularly, has a lot to benefit across the spectrum. These measures will provide a great impetus to the industry.

The withdrawal of excise duty on life saving drugs and reduction of customs duty to 5 pc on these drugs was eagerly sought and this is another demand of the pharmaceutical sector which has been met by the Finance Minister.

Insertion of a new sub-section (11C) in Section 80-IB to grant a five-year tax holiday for setting up hospitals anywhere in India and especially in Tier-2 and Tier-3 towns will pave the way for the expansion of private sector healthcare to smaller towns.

A number of pharmaceutical companies focused on AIDS products will stand to gain from the excise duty coming to nil. All in all pharmaceutical companies irrespective of size, scale and geography will largely benefit from these measures.

Ganesh Raj, Partner & National Leader, Real Estate Practice, Ernst & Young: There were more expectations from the Union Budget 2008 for the growing real estate Sector. There has been no relief on service tax on rentals which will continue to increase pricing pressure, though in the short to medium term this will not have a drastic impact as supply outstrips demand.

Eventually, the burden would be passed on to tenants.

The 5-year tax holiday granted towards 2/3/4 star hotels in UNESCO-declared 'World Heritage Sites' will boost development and offer relief to shortage of rooms in India. Further, tax holiday on establishing hospitals anywhere in India and specially in Tier-2 and Tier-3 cities will fuel growth in these cities and attract investment.