Speaker, I turn to my main proposals on indirect taxes.
will first take up customs
our domestic industry has weathered the impact of the global financial
crisis and the resultant slowdown with resilience, it is yet to fully
find its feet. Manufacturing growth, which had turned negative in
October 2008 on a year-on-year basis and remained in that zone till
March this year, appears to be barely turning the corner. However, the
global scenario remains worrisome and it is my view that the paramount
need is to provide industry with a stable framework. My proposals on
indirect taxes seek to achieve this by maintaining the overall rate
structure for customs and central excise duties as well as service
tax. I must hasten to add that I have not hesitated to act where
distortions provide a compelling reason or where relief would provide
a healing touch.
exemption from basic customs duty was provided to Set Top Boxes in
2006 to enable their free import for the smooth introduction of the
Conditional Access System (CAS). Now that production capacity has come
up in the country, I propose to impose a nominal basic customs duty of
5 per cent on such Set Top Boxes to encourage domestic value
electronic hardware industry has a strong potential for creating
employment especially in the SME sector. I intend to reduce the basic
customs duty on LCD panels from 10 per cent to 5 per cent to support
indigenous production of LCD televisions.
exemption from CVD of
4 per cent was available to accessories, parts and components imported
for the manufacture of mobile phones till the
30th of June, 2009 .
I propose to reintroduce this exemption for another year.
reasons that are apparent, industry sectors having an
export-orientation have been adversely impacted by the demand
compression in global markets. Presently, exporters of leather
products, textile garments, footwear as well as sports goods are
permitted to import raw materials, consumables etc. upto 3 per cent of
the fob value of their exports free of duty. I propose to add a few
more items to these lists. Full exemption from basic customs duty is
being provided to rough corals for encouraging value-addition and
is imperative that the contribution of new and renewable energy
sources of power is enhanced if we have to successfully combat the
phenomena of global warming and climate change. I am reducing the
basic customs duty on permanent magnets - a critical component for
Wind Operated Electricity Generators - from 7.5 per cent to 5 per
influenza vaccine and nine specified life saving drugs used for the
treatment of breast cancer, hepatitis-B, rheumatic arthritis etc. and
on bulk drugs used for the manufacture of such drugs, I propose to
reduce the customs duty from 10 per cent to 5 per cent. They will also
be totally exempt from excise duty and countervailing duty.
duty will also be reduced from 7.5 per cent to 5 per cent on two
specified life saving devices used in treatment of heart conditions.
These devices will be fully exempt from excise duty and CVD also.
bars currently attract customs duty at the specific rate of Rs.100 per
ten grams while other forms of gold (excluding jewellery) are
chargeable to a duty of Rs.250 per ten grams. These rates were fixed
in 2004 and have not been reviewed even as the price of gold has
increased manifold. I propose to partially restore the incidence by
increasing these rates to Rs.200 per ten grams and Rs.500 per ten
grams respectively. Along the same lines, the customs duty on silver
(excluding jewellery) will be increased from Rs.500 per kg to Rs.1,000
per kg. These revised rates would also apply to gold and silver,
including ornaments that are not studded, when imported by a bona
fide passenger as
will now come to central
Members are aware that the Government announced a series of fiscal
stimulus packages, one of the key elements of which was the sharp
reduction in the ad valorem rates of Central Excise duty for
non-petroleum products by 4 percentage points across the board on 7th
of December 2008 and by another 2 percentage points in the mean CENVAT
rate on the 24th of February, 2009.
of the consequences of these cuts was that pure cotton textiles came
to be fully exempted from excise duty. We have received
representations that full exemption prevents manufacturers from
availing of export rebate of the duty paid from CENVAT credit. I
propose to rectify this situation by restoring the erstwhile optional
rate of 4 per cent for cotton textiles beyond the fibre stage.
since the revamp of the excise duty structure on textiles by my
distinguished predecessor in the 2004 budget, a differential in rates
has been maintained between the cotton sector and the manmade sector.
In keeping with the integrity of the earlier structure, I propose to
restore the rate of 8 per cent Central Excise duty on manmade fibre
and yarn on a mandatory basis and on stages beyond fibre and yarn at
that rate on optional basis. These changes, together with duty changes
on intermediates, would imply that the duty on all types of manmade
fibre and yarn and their intermediates would be the same, easing the
problem of credit accumulation.
waste and cotton waste are chargeable to basic customs duty of 15 per
cent. These are used in
the manufacture of cheaper varieties of textile articles such as
blankets and rugs. As a
measure of relief to this sector, I propose to reduce the basic
customs duty on these items to 10 per cent.
the Government’s proclaimed objective of introducing a Goods and
Services Tax (GST) both at the national and State level, some more
steps in that direction are necessary. One
measure that would facilitate the process is the further convergence
of central excise duty rates to a mean rate - currently 8 per cent. I
have reviewed the list of items currently attracting the rate of 4 per
cent, the only rate below the mean rate. There
is a case for enhancing the rate on many items appearing in this list
to 8 per cent, which I propose to do, with the following major
pharmaceuticals and medical equipment.
of the other items on which I propose to retain the rate of 4 per cent
paperboard & their articles;
of mass consumption such as pressure cookers, cheaper electric bulbs,
low-priced footwear, water filters/purifiers, CFL etc.;
driven pumps for handling water; and
details are available in the relevant notifications.
obtained from vegetable oils and used for blending with petro-diesel,
is currently exempt from excise duty. I
now propose to fully exempt petro-diesel blended with bio-diesel from
order to encourage the use of this environment friendly fuel and
augment its availability in the country, I also propose to reduce
basic customs duty on bio-diesel from 7.5 per cent to 2.5 per cent -
at par with petro-diesel. With
these proposals I hope to see a smile on the faces of the green
other proposals on central excise duties seek to address distortions
that the manufacturing industry has been complaining about.
IT industry has pointed out that it is facing difficulties in the
assessment of software which involves transfer of the right to use
after the levy of service tax on IT software service. To resolve the
matter, I propose to exempt the value attributable to the transfer of
the right to use packaged software from excise duty and CVD.
construction industry has represented that they are facing
difficulties on account of withdrawal of exemption on goods
manufactured at site. I propose to restore full exemption to such
goods, including pre-fabricated concrete slabs or blocks, when used
for further construction at site.
specific component was added to the ad valorem duty of 24 per cent
applicable to large cars and utility vehicles in June last year. In
the case of vehicles of engine capacity below 2000 cc, this component
was Rs.15,000/- per unit while for vehicles of higher engine capacity
it was Rs.20,000/- per unit. These
rates are now being unified at the lower level of Rs.15,000/- per
driven trucks provide a useful means of transport within cities and
across short distances. These are chargeable to excise duty of 20 per
cent. I propose to reduce
excise duty on these trucks to 8 per cent to equate the duty with
similar vehicles run on diesel.
Speaker, I fear that my proposals relating to gold and silver on the
customs side would somewhat dent my popularity with women. I
propose to salvage this by fully exempting branded jewellery from
now turn to my proposals on service
is an international practice to zero-rate exports. To achieve this
objective, a scheme was announced in 2007, granting refund of service
tax paid on certain taxable services used after the clearance of
export goods from the factory. For
some time now, the exporting community has been expressing
dissatisfaction over the difficulties faced in obtaining such refunds.
Several procedural simplifications attempted in the past have also not
yielded satisfactory results. The solution seems to lie in placing
greater trust on the claims filed by the exporters. Keeping
this in view, I propose to make the following changes in the scheme:
received by exporters from goods transport agents and commission
agents, where the liability to pay service tax is ab
initio on the exporter,
would be exempted from service tax. Thus,
there would be no need for the exporter to first pay the tax and later
other services received by exporters, the exemption would be operated
through the existing refund mechanism based on self-certification of
the documents where such refund is below 0.25 per cent of fob
value, and certification of documents by a Chartered Accountant for
value of refund exceeding the above limit.
Export Promotion Councils and the Federation of Indian Export
Organizations (FIEO) provide a valuable service in augmenting our
export effort. I propose to
exempt them from the levy of service tax on the membership and other
fees collected by them till 31st
March, 2010 .
the goods transport sector, service tax is currently levied on
transport of goods by road, by air, through pipelines and in
containers. However, goods
carried by Indian railways or those carried as coastal cargo or
through inland waterways are not charged to service tax. In
order to provide a level playing field in the goods transport sector,
I propose to extend the levy of service tax to these modes of goods
transport. The new levy is
not likely to impact the prices of essential commodities or goods for
mass consumption, as suitable exemptions would be provided.
the Hon’ble Members are aware, services provided by chartered
accountants, cost accountants, and company secretaries as well as by
engineering and management consultants are presently charged to
service tax. Although
there is a school of thought that legal consultants do not provide any
service to their client, I hold my distinguished predecessor in high
esteem and disagree! As
such, I propose to extend service tax on advice, consultancy or
technical assistance provided in the field of law. This
tax would not be applicable in case the service provider or the
service receiver is an individual.
having ‘Stage Carriage Permits’ and run by State undertakings are
exempted from service tax. However, transportation of passengers
undertaken by private enterprises in vehicles having ‘Contract
Carriage Permits’ is, subjected to service tax. In
order to bring parity in tax treatment, I propose to exempt such
transportation also from the levy of service tax.
July, 2008 goods transport agents (GTA) went on strike with several
demands. One of the
demands that was accepted by the government was to exempt certain
services, such as packing, cargo handling and warehousing, provided to
GTAs en route, from service tax. For
this purpose an exemption notification was issued. It was also
demanded by goods transport agents that the proceedings already
initiated against such service providers should be dropped. The
Government has accepted this genuine demand. Therefore, I propose to
make certain legislative changes required to fulfill this promise.
of notifications giving effect to the changes in customs, central
excise and service tax will be laid on the Table of the House in due
tax proposals on direct taxes are revenue neutral. On indirect taxes,
they are estimated to yield a net gain of Rs.2,000 crore for a full