INDIRECT TAXES
| House approves Finance Bill Thu, 29 Apr 2010 18:58:00 GMT |
| Business Standard Economy Polices News House approves Finance Bill BS Reporter / New Delhi April 30, 2010, 0:28 IST Finance Minister Pranab Mukherjee today announced several tax exemptions and sops before putting the Finance Bill, 2010, to vote in the Lok Sabha. The bill was cleared by the House, amid a walk-out by the main opposition Bharatiya Janata Party, signalling approval for the Union Budget 2010-11. In his reply to the debate on the bill, Mukherjee announced a Rs 362.82-crore debt relief package for coffee growers and service tax concessions for construction industry, airlines and new hospitals with a minimum 100-bed capacity. The minister, however, stuck to the excise and customs duty increase on petroleum products. He said if the government was made to absorb Rs 85,000 crore estimated loss on sale of petroleum products in addition to other expenditure, it would be left with no money for development programmes. Mukherjee also increased the export duty on iron ore lumps to 15 per cent from 5 per cent to ensure cheaper availability of iron ore for the domestic industry. The government had in December 2009 increased the export duty on iron ore lumps from 5 per cent to 10 per cent and on fines from zero to 5 per cent. In response to representations from producers of stainless steel, the minister reduced basic customs duty on stainless steel melting scrap by half, from 5 per cent to 2.5 per cent. He also announced shares transferred from companies to limited liability partnership (LLP) firms would not attract any tax.This, he said, was being done to allow tax-neutrality. In addition, the minister put a cap on service tax on domestic air flight at Rs 100 per travel and international travel by economy class at Rs 500, while fully exempting service tax on air travel to the North-East. The real estate sector, which has been protesting imposition of 10 per cent service tax on sale of property, got a marginal relief in the form of higher abatement of 75 per cent from 67 per cent. This means service tax would now be levied only on 25 per cent of the gross value, where such value includes the value of the land, instead of the earlier 33 per cent. The effective rate would stand reduced to 2.5 per cent from 3.4 per cent. Besides, low-cost housing schemes for the urban poor under the Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awas Yojna would attract zero service tax. “These measures would provide some relief to the industry, though the expectations were clearly higher. It is, however, still not clear as to whether service tax would apply with respect to projects under construction or where part-payment has already been made,” said Pratik Jain, executive director, KPMG. For coffee growers, relief came in the form of a 50 per cent waiver of their total liability on loans taken before 2002, subject to a maximum benefit of Rs 5 lakh per farmer to be borne by the government. An additional 25 per cent would be waived by banks and the balance would be rescheduled. The package also envisages 20 per cent waiver of liability under crop loans with 10 per cent each being borne by the Union government and banks, respectively, subject to a maximum benefit of Rs 1 lakh. For post-2002 term loans, 10 per cent of the total liability would 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 is Rs 241.33 crore, while benefit to coffee growers will be around Rs 362.82 crore,” the minister said. Basic customs duty on 11 specified drugs, including two anti-cancer and one for the treatment of AIDS, has also been reduced to 5 per cent. These drugs are also being exempted from countervailing duty by way of excise duty exemption. Mukherjee also increased the statutory rate of export duty on raw cotton to Rs 10,000 a tonne from Rs 2,500 in order to contain the spiraling prices by disincentivizing exports. Though the enhancement does not mean anything now since currently export of raw cotton is banned. Flax fibre and yarn, that are not produced in India in significant quantities, would be exempted from basic customs duty in order to encourage domestic value addition. Acetate rayon tow, used in cigarette filter rods, have been exempted from 4 per cent special countervailing duty (CVD) though it would continue to attract 10 per cent CVD. This was done since 10 per cent excise duty on filter rods created an inversion in duty. |
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