FM Announces Fresh
Sops in Reply to Debate on FB2010
Finance Minister, Pranab Mukherjee, while replying to the debate on Finance
Bill-2010 in Lok Sabha on 29 April 2010, announced an additional relief package
for exporters and importers.
The main changes are:
CUSTOMS
Imports
1. Basic
customs duty on Scrap of stainless steel, for the purpose of melting reduced to
2.5% from 5%.
2. Duty
Exemption of 5% restored on Ostomy appliances
3. Zero Duty
on Flax falling under heading 5301
4. Zero duty
on Parts and Accessories of Tunnel boring machines – Basic and Additional duty
fully exempted
5. Zero
basic duty on Optical Disc Drives’ (ODD)
6. Basic
customs duty on 11 specified drugs including two anti-cancer
and one for the treatment of AIDS is reduced to 5%. These drugs are also
exempted from CVD by way of excise duty.
7. Special
CVD of 4% exempted on Acetate Rayon Tow for the manufacture of Cigarette Filter
Rod.
Exports
8. Export
duty raised to 15% from 10% on Iron Ores and
Concentrates.
EXCISE
9. Additional
duty of Excise (CVD) reduced to 4% from 10% on Paper Waste and Scrap.
10. Central
excise duty (Additional) on corrugated boxes and cartons was reduced to 4% from
8% when they manufacture such cartons from corrugated paper or paperboard also.
11. Full
exemption from excise duty has been extended to scented supari.
12. Excise
duty reduced on hand-rolled cheroots priced upto Rs.3
per stick to 10%. Similarly, the additional excise duty on this product has now
applicable1.6%.
13. The
entries listed under SNo. 11 of Central Excise
notification 02 dated 01.03.2008 omitted. The entry was “2402 10 10 (Cigar and cheroots), 2402 10 20 (Cigarillos,), 2402 90
20 (Cigarillos of tobacco substitutes) and 2402 90 90
(Other)”.
14. Excise
duty exemption extended to all types of packing material.
SERVICE TAX
15. Service
Tax exemption extended to “Modular Employment Skill Development courses”
provided by the training institutes registered under ‘Skill Development
Initiative Scheme’ of the Ministry of Labour.
DUTY DRAWBACK
16. Drawback
on cotton yarn withdrawn.
17. Customs,
Central Excise Duties and Service Tax Drawback Rules, 1995 Rule 3(1)(v), Rule 6(4) and Rule 7(5) amended
Text of Finance Minister’s Speech
Finance Minister, Shri Pranab Mukherjee, while replying
to the debate on Finance Bill-2010 in Lok Sabha on 29 April 2010, announced an
additional relief package. The extracts from the Finance Minister’s speech are
as follows:
“Coffee Debt
Relief Package 2010
The Coffee growers in the country have been facing
long standing financial problems ever since the coffee prices fell to very low
levels during the period 2000-2004. Relief Packages in the form of Special
Coffee Term Loan 2002 and Special Coffee Relief Package 2005 were sanctioned to
revive coffee sector, besides other initiatives like PM’s Relief Package for
Debt Stressed farmers and Debt Waiver and Debt Relief Scheme 2008. However, a
large number of affected growers did not get the required relief.
The Government has now decided to approve a fresh
Coffee Debt Relief Package, specifically for the small growers. As per this,
for pre-2002 loans, 50 per cent of the total liability shall be waived subject
to a maximum benefit of Rs.5 lakh per farmer to be borne by Government of
India. An additional 25 per cent shall be waived by banks and balance shall be
rescheduled. The Package also envisages 20 per cent waiver of liability under
Crop Loans with 10 per cent each being borne by the Government of India and banks
respectively, subject to a maximum benefit of Rs.1 lakh. For Post-2002 Term
Loans, 10 per cent of the total liability shall be waived subject to a maximum
benefit of Rs.1 lakh. The Package shall also provide relief to medium and large
farmers who shall be permitted to reschedule the loans. The total financial
implication for the Government of India is Rs.241.33 crore while benefit to
Coffee growers will be around Rs.362.82 crore.
Direct Taxes
While introducing the Finance Bill, 2010 in respect
of Direct Taxes, emphasis has been on relief to individual taxpayers,
encouraging research and development in the country, providing some relief
measures in view of the recessionary impact and rationalization of procedure
and steps to mitigate compliance cost. Based on the discussions and
representations received after the introduction of the Finance Bill, certain
further reliefs and concessions on direct taxes are proposed.
Availability of modern hospitals is a priority area
for the country and private sector participation is desirable in order to
provide better healthcare facilities to citizens. Currently, hospitals (of more
than 100-bed capacity) constructed in any area other than the “excluded area”
are eligible for claiming hundred per cent deduction under section 80-IB (11C)
of the Income Tax Act. Considering the pressing need for more hospitals all
over the country, it is proposed to include the business of a new hospital
anywhere in India, with at least one hundred beds for patients, as a ‘specific
business’ for availing the benefit of investment linked deduction.
Another priority of the Government is to make India
slum free. The Ministry of Housing & Urban Poverty Alleviation has issued
draft Guidelines for Slum-Free City Planning. The Rajiv Awas
Yojana (RAY) for slum-dwellers and the urban poor
envisages ‘slum-free India’ by encouraging States/Union Territories to tackle
the problem of slums in a definitive manner. For this purpose, it is proposed
to also include the business of developing and building a housing project under
a scheme for slum redevelopment or rehabilitation framed by the Central
Government or a State Government as a ‘specified business’ for availing the
benefit of investment linked deduction.
In consequence of the decision to allow tax-neutrality
for conversion of a company in to Limited Liability partnership (LLP), it is
proposed to also exempt from taxation the transfer of shares by the
shareholders of the company in respect of such a conversion.
Service Tax
Ever since I proposed imposition of service tax on
international and domestic air passengers in the Budget this year, I have
received number of representations expressing concern that this levy would
adversely affect the civil aviation sector and would make air travel
prohibitive. I would like to clarify that it would not be so. The effective
rates of levy, when they come into effect, would be a maximum of Rs.100 per
travel for domestic journey in any class and a maximum of Rs.500 per travel for
international journey by economy class. Further, domestic air travel to and
from the North-Eastern sector would be exempt even from this moderate tax.
The construction sector has requested for a review
of the changes in the service tax law proposed in this year’s Budget.
Several suggestions have been made by the trade associations. Considering all
the inputs, I propose to provide tax relief to this sector by enhancing their
rate of abatement from 67% to 75% of the gross value where such value includes
the value of the land constructed upon. Certain procedural bottlenecks relating
to the completion certificate prescribed in the law would also be simplified.
With a view to give thrust to the low cost housing
schemes for the urban poor, I propose to exempt service tax on constructions
under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and under Rajiv Awas Yojna.
The above changes relating to construction sector
would be effective from a notified date after enactment of the Finance Bill,
2010.
I have received suggestions that the present service
tax exemption available to the vocational training institutes affiliated to the
National Council for Vocational Training and offering courses in designated
trades should also be extended to “Modular Employment Skill Development
courses” provided by the training institutes registered under ‘Skill
Development Initiative Scheme’ of the Ministry of Labour. As this initiative
intends to generate employment to the rural and urban poor, school dropouts and
semi-skilled labourers, I propose to accept this
suggestion and exempt such courses with immediate effect. The notification to
this respect is being issued today.
Indirect Taxes
I shall now take up specific issues. Hon’ble Members would recall that I had proposed an
increase in excise duty on almost all tobacco products including cigars and
cheroots. I have received a large number of representations on behalf of the
manufactures of ‘hand-rolled cheroots’ – an industry located primarily in the
cottage and household sector. Considering the nature of this labour-intensive
industry, I now propose to reduce the excise duty on hand-rolled cheroots
priced upto Rs.3 per stick to 10% ad valorem.
Similarly, the additional excise duty on this product shall now be 1.6% ad
valorem.
Full exemption from excise duty has been provided
to betel nut product commonly known as ‘supari’.
This exemption is now being extended to scented supari.
Central excise duty on corrugated boxes and cartons
was reduced from 8% to 4% when they are manufactured starting from kraft paper. I propose to extend the exemption to cover
units that manufacture such cartons from corrugated paper or paperboard also.
Paper and paperboard manufactured from non-conventional raw material
such as waste paper attract a concessional excise duty of 4% subject to certain
conditions. Waste paper is chargeable to an excise duty of CVD of 10%. Domestic
industry has represented that this creates an inversion leading to the
accumulation of Cenvat credit. I propose to reduce
the excise duty on waste paper to 4% to rectify this anomaly.
As the Hon’ble Members
are aware, the excise exemption for small scale units is not available to goods
that bear the brand name of another person. A relaxation of this
condition is available in respect of specified packing materials which
are normally not sold under the brand name that they bear. In order
to resolve disputes about the coverage of this relaxation, I propose to extend
it to all types of packing material.
Automobile components have been subjected to excise duty on the basis of
their retail sale price. In order to resolve disputes about the coverage of
this provision, it was amended so as to make it applicable to parts, components
and assemblies of vehicles of Chapter 87 of the Excise Tariff. Since these
components are also used for earthmoving machinery like loaders, excavators
etc., I now propose to apply this provision to the parts, components and
assemblies of such machinery as well.
Tunnel boring machines are critical for hydroelectric projects. Since
these are not produced domestically, full exemption from customs duty was
provided in this budget. It has been represented that owing to their huge size
these machines are incapable of import in a single consignment. Considering
this practical difficulty the exemption is being extended to parts and
components of tunnel boring machines.
Hon’ble
Members would recall that the customs duty regime on medical equipment was
rationalized in this budget by prescribing a uniform basis duty of 5% and CVD
of 4%. In doing so listed exemptions were dispensed with. I have received a
number of representations in respect of Ostomy
appliances in whose case a concession has been removed. Considering that these
are mainly used by cancer patients, I propose to provide this concession to
such appliances.
Basic customs duty on 11 specified drugs
including two anti-cancer and one for the treatment of
AIDS is being reduced to 5%. These drugs are also being exempted from CVD by
way of excise duty exemption.
‘Optical Disc Drives’ (ODD) are ITA-bound
and thus permissible for import without payment of duty. I propose to fully
exempt specified parts or compo9nents required for the manufacture of ODD from
basic customs duty.
Cigarette filter rods are manufactured from acetate rayon tow. While full
CVD of 10% and special CVD of 4% is applicable to tow,
the excise duty on filter rods is 10% creating an inversion in duty. I propose
to fully exempt acetate rayon tow from special CVD of 4%.
Flax fibre and yarn are not produced in India in significant
quantities. I propose to fully exempt them from basic customs duty in order to
encourage domestic value addition.
As the House is aware, an export duty at the
statutory rate of Rs.2500 per metric tonne (PMT) was imposed on raw cotton with
effect from 9th April, 2010 in order to
contain the spiraling prices by disincentivizing
exports. The Government has been keenly watching the quantum of exports well as
the price situation. In order to meet any future exigency, the statutory rate
for this item is being enhanced to Rs.10,000 PMT while
maintaining the effective rate at the current level. For this purpose, an
official amendment to the Finance Bill, 2010 is being moved.
Except in the case of export duty on raw cotton,
the changes in the customs and excise duties would come into force with
immediate effect. The notifications in this respect are being issued today.
In December, 2009 the export duty on iron ore lumps
was enhanced from 5% to 10% and on fines from Nil to 5%. Keeping in view the
trend in the quantum of exports and domestic and international prices, the duty
on iron ore lumps is being increased further to 15%.
In response to
representations from the domestic producers of stainless steel, I propose to
reduce basic customs duty on stainless steel melting scrap from 5% to 2.5%.”