The Budgets for 2004-05, presented by Finance Minister P Chidambaram in Parliament, does not seem to have pleased the industry.

In a session, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) to understand the impact of the Budget proposals on industry and its ramification on the economy, Hitesh Gajaria, partner, KPMG, specialist in direct taxes, said that the finance minister was gambling on the increased tax and revenue collection.

"The finance minister has tried to do a balancing act between the National Common Minimum Programme and the political imperative and the fiscal and economic prudence initiated by the earlier government. He is gambling on the estimated rise in collection of tax and revenues," said.

In direct taxes, the corporate tax is expected to shoot up to Rs 88,436 crore  (Rs 884.36 billion) for FY 05, from Rs 62,986 crore  (Rs 629.86 billion) in the last fiscal year, a targeted increase of Rs 25,450 crore (Rs 254.50 billion).

Similarly, other direct taxes are expected to increase by Rs 10,660 crore (Rs 106.60 billion), a growth of 26 per cent, from Rs 40,414 crore  (Rs 404.14 billion) last year to Rs 51,071 crore  (Rs 510.71 billion) in the current year.

In the indirect tax front, revenue from customs is targeted to rise 10 per cent from Rs 49,350 crore  (Rs 493.50 billion) to Rs 54,250 crore, an increase of Rs 4,900 crore (Rs 49 billion).

Revenue from excise is targeted to increase by 18 per cent, from Rs 92,379 crore  (Rs 923.79 billion) to Rs 1,09,199 crore (Rs 1,091.99 billion), an increase of Rs 16,820 crore (Rs 168.20 billion).

The highest growth among all the indirect taxes is expected to come from service tax. The two percentage increase in the service taxes (from 8 per cent to 10 per cent) is expected to rake in a total revenue of Rs 14,150 crore  (Rs 141.50 billion) in the current financial year compared with the collection of Rs 8,300 crore  (Rs 83 billion) last year.

The total increase in the revenue through direct and indirect taxes is expected to be Rs 63,680 crore  (Rs 636.80 billion) to make total of Rs 3,17,109 crore  (Rs 3.171.09 billion), which would be 25 per cent higher from previous fiscal year's collection of Rs 2,53,429 crore (Rs 2,534.29 billion).

"Government has a noble cause lined up for the increase in cess for education for all, but increasing tax burden on Indian industry is matter of concern," said Gajaria.

According to KPMG Corporate Tax Rate Survey, India's corporate tax rate of 36.59 per cent (excluding dividend distribution tax) is among the highest in the world.

The average corporate tax rates for the European countries is 31.32 per cent, for Latin American countries 30.02 per cent and 30.37 per cent for countries in the Asia-Pacific region.

"In the financial sector, curbing dividend and bonus stripping will lead to further deterrence to tax avoidance. In the infrastructure sector, extending tax holiday benefit is a good news, but the investors in the infrastructure projects may be taxed," said Gajaria.

While criticising the indirect tax proposals in the Budget, Jayraj S Seth, senior manager, KPMG said, "Education cess is a welcome step, but tax payers will have to see that government utilises the collected amount for the pre-decided cause as promised. The hike in central excise duty on iron and steel to 12 per cent is a major concern for the steel industry."

The finance minister has targeted around Rs 4,000 to Rs 5,000 crore  (Rs 40-50 billion) to be collected through education cess on excise duty, income tax, service tax and customs duty.

Contribution of service tax in government revenue has seen over 90 per cent growth in the last fiscal year. Similarly service tax has risen drastically from 5 per cent in 2002 to 10.2 per cent in 2004.

Revenue from service tax was Rs 4,122 crore  (Rs 41.22 billion) in 2002 -03, which touched the Rs 8,000-crore limit in the 2003-04 due to the expansion of service tax net.

The same trend is expected to continue in the current financial year too.

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