While the grapevine was that the companies may be allowed an option to pay an increased tax on their book profits, in lieu of the dispute-laden FBT, such amendments remained a distant dream. What came as a slight relief, however, was the extension of MAT credit re-introduced in the last Budget for a period of 7 years.

As indicated by the finance ministry sources on several occasions, the capital markets, which reaped a rich harvest in the recent bull run, would now be expected to contribute to the exchequer the securities transaction tax at a rate 25 per cent higher than the prevailing rates.

However, going against the rationale for the abolition of tax on long-term capital gains  from securities transactions by levy of STT thereon, a back-door entry to taxation of LTCG has been granted by expressly making it subject to tax under MAT provisions.

As a major shot in the arm of the power sector- tax holiday to undertakings carrying out generation or transmission of electricity - is proposed to be extended to undertakings commencing such operations on or before March 31, 2010, as against the existing threshold date of March 31, 2006.

Similar extension to March 31, 2009, has also been proposed in respect of developers of industrial parks. The FM's plans to introduce more number of metro projects (much on the line of the widely successful DMRC project in Delhi) make clear that infrastructure is a priority.

A change that will go a long way in bridging the existing shortage of funds with scheduled banks is to allow deduction to individuals in respect of investments made by them in fixed deposits with a tenure exceeding 5 years.

The amendments made to the FBT law gave the industry something to smile about, but left a lot to be desired.

While the insurance companies sported the biggest smile due to exemption of the FBT on contributions to superannuation funds up to Rs 1 lakh (per year per employee), pharma companies got another beneficial treatment by way of exemption of free medicinal samples and equipment distributed by them from the FBT.

The only relief provided on sales promotion expenditure is that the FBT would not be any more payable on payments made to brand ambassadors. Also, the FBT will now be leviable on 5 per cent of the expenditure incurred on boarding, lodging and hospitality by airline and shipping companies instead of their existing valuation at 20 per cent. Similar reduction in valuation has also been made in respect of expenditure on travel and tour.

In continuation with the recent policy trends as regards foreign investments, the FM announced several relaxations in investment caps such as increase in the limits of FII investment from $0.5 bn to $1.5 bn in corporate bonds and from $1.7 bn to $2 bn in G-secs. The existing 10 per cent cap of foreign investments in mutual funds has also been done away with.

The increase of the service tax rate to 12 per cent, and the inclusion of 15 more services in the tax net were expected changes, considering the FM has always advocated aligning service tax rates with prevailing CENVAT rates and that service tax is the blue-eyed boy of the national exchequer for its potential as a major source of revenue.

Contrary to the widely held belief that the FM may cut the peak rates for customs duty by 5 per cent to bring the tariffs closer ASEAN rates, the proposed reduction from 15 per cent to 12.5 per cent leaves the domestic industry amply cushioned from foreign competition. At the same time, the reduction of duty rates to 5 per cent in the case of major plastic raw materials (from the existing 10 per cent) and packing machineries (from the existing 15 per cent) was a ingenious thought that shall benefit directly or indirectly, almost all the sectors of the economy.

On the excise duty front, a major dampener to the spirits of the software industry is the proposal to levy 8 per cent duty on over-the-counter-sale of packaged software, extending too far for comfort a decision of the apex court upholding the levy of sales tax on such transactions. However, he gave industry some reason to smile by exempting storage medias such as DVD drives and flash drives from levy of excise duty, and by acceding to its request for re-imposition of excise duty at the rate of 12 per cent on computers, enabling it to benefit by availing full input credit. The FM also made clear his plans to promote India as a manufacturing hub for semi-conductors, LCDs, OLEDs, and similar other IT related hardware components, which, in the long run, will boost the sector.

To remove the anomaly in the textile sector,the  excise duty structure on man-made fibres  has been aligned with that of cotton by reduction of excise duty thereon from 16 per cent to 8 per cent, and a corresponding reduction of customs duty from 15 per cent to 10 per cent. This welcome change will make the spinning of MMFs such as PSF, VSF and ASF a financially viable option.

The small car manufacturers are rejoicing as a result of reduction in the excise duty rates to 16 per cent, which coupled with the reduction in customs duty on primary steel and ferro alloys will leave them with an even fat wallet.

Overall, the Budget is a balanced one for companies, and did not create any big bang. Most of the changes proposed were anticipated by the industry and reflected the seriousness of the promises made by the FM in implementing his growth targets.

Mukesh Butani is partner, BMR and Associates.