NEW DELHI: After Monday's Union Budget presentation by Finance Mukherjee, some goods and services are likely to cost more, while some may become cheaper.
To be costlier :
*Medical bills to rise by 5%
*Prices of branded apparel may go up
*Air travel to get costlier
*Eating out to become dearer
*Branded jewellery to be costlier
*Toothpowder
*Spectacles
*Bicycles
*Cement
*Pens, Pencils
*Cakes, pastries
*LIC premium
*Sewing machines
*Medical equipment
*Holidaying in India
*Visit to a nearby club
To be cheaper:
*Eco-friendly hybrid vehicles to be cheaper
*Sanitary napkins
*Diapers
*Imported medicines
*LED lights
*Home loans
*Mobile sets
*Refrigerators
*Paper
*Printers
*Steel
*Soap
*Treatment for heart attacks
Unchanged
*Car prices to remain unchanged
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Tuesday, March 1, 2011
6-phase polls in WB, single-phase in TN, Kerala
NEW DELHI: Elections in four states — West Bengal, Kerala, Tamil Nadu and Assam and the Union Territory of Puducherry -- to be held between April 4 and May 10 are not only likely to end the 35-year-old Left rule in Bengal but will also lead to "structural change" in government as promised by the prime minister.
It remains to be seen if the PM's statement leads to a major reshuffle or a complete overhaul of the government with some big guns moving to the party organization. The Congress expects that at least three states--Kerala, West Bengal and Assam--would be in its kitty to boost its sagging morale.
In Tamil Nadu, where the Congress and DMK are struggling to hammer out a seat-sharing agreement, the party seems to realize that the AIADMK's alliance with actor Vijayakanth's DMDK may have given the latter a slender edge. However, it is hopeful of winning in neighbouring Puducherry.
New governments would be in place in all states after May 13, when the results are announced, but it is the outcome in West Bengal that is going to be the focus of attention. The Left faces the most formidable challenge ever from the Trinamool Congress-Congress combine. Since the 2009 parliamentary polls, Mamata Banerjee-led Trinamool has swept all the elections--bypoll, panchayat and civic bodies--in the state.
If results conform to popular estimates, coming elections will mark the first time since 1977 when the CPM will be simultaneously without power, even leverage, at the Centre and in West Bengal and Kerala.
Senior CPM leaders privately admit that the Trinamool-Congress alliance is formidable. More important is the admission by Left leaders that people have made up their mind for change. Mamata's exhortation to people that if the Left can get seven terms, she deserves one chance has caught people's imagination.
"No amount of pleas to people that its cadre has changed for good can take away what people have suffered for so long at the hands of the CPM's local leaders. The change is inevitable," said a senior Left leader from Bengal. He added that putting the fear of Mamata--as the Left has been doing lately--is proving to be counter-productive. "It's a desperate call by the Left and no one is listening," he said.
Kerala will be another headache for the Left. The state votes the Congress-led United Democratic Front and the CPM-led Left Democratic Front in cyclical fashion. But, it would be an easy interpretation of the Left's near-certain defeat. The CPM, the lead party in government, is in complete disarray. Chief minister V S Achuthanandan--now under fire for allegations of corruption against his son--is the party's asset and a bigger liability.
Though his personal image is impeccable, the divide between the party and government has widened in the past five years. His bete noire and CPM state secretary Pinrayi Vijayan, who is facing serious corruption charges, is unlikely to contest. The party's problems would be in denying a ticket to Achuthanandan. It would spark a protest, as in 2006, but for the CPM, desperate to groom a new leadership in the state, the choice is going to be tough.
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It remains to be seen if the PM's statement leads to a major reshuffle or a complete overhaul of the government with some big guns moving to the party organization. The Congress expects that at least three states--Kerala, West Bengal and Assam--would be in its kitty to boost its sagging morale.
In Tamil Nadu, where the Congress and DMK are struggling to hammer out a seat-sharing agreement, the party seems to realize that the AIADMK's alliance with actor Vijayakanth's DMDK may have given the latter a slender edge. However, it is hopeful of winning in neighbouring Puducherry.
New governments would be in place in all states after May 13, when the results are announced, but it is the outcome in West Bengal that is going to be the focus of attention. The Left faces the most formidable challenge ever from the Trinamool Congress-Congress combine. Since the 2009 parliamentary polls, Mamata Banerjee-led Trinamool has swept all the elections--bypoll, panchayat and civic bodies--in the state.
If results conform to popular estimates, coming elections will mark the first time since 1977 when the CPM will be simultaneously without power, even leverage, at the Centre and in West Bengal and Kerala.
Senior CPM leaders privately admit that the Trinamool-Congress alliance is formidable. More important is the admission by Left leaders that people have made up their mind for change. Mamata's exhortation to people that if the Left can get seven terms, she deserves one chance has caught people's imagination.
"No amount of pleas to people that its cadre has changed for good can take away what people have suffered for so long at the hands of the CPM's local leaders. The change is inevitable," said a senior Left leader from Bengal. He added that putting the fear of Mamata--as the Left has been doing lately--is proving to be counter-productive. "It's a desperate call by the Left and no one is listening," he said.
Kerala will be another headache for the Left. The state votes the Congress-led United Democratic Front and the CPM-led Left Democratic Front in cyclical fashion. But, it would be an easy interpretation of the Left's near-certain defeat. The CPM, the lead party in government, is in complete disarray. Chief minister V S Achuthanandan--now under fire for allegations of corruption against his son--is the party's asset and a bigger liability.
Though his personal image is impeccable, the divide between the party and government has widened in the past five years. His bete noire and CPM state secretary Pinrayi Vijayan, who is facing serious corruption charges, is unlikely to contest. The party's problems would be in denying a ticket to Achuthanandan. It would spark a protest, as in 2006, but for the CPM, desperate to groom a new leadership in the state, the choice is going to be tough.
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Salary earners with income up to Rs 5 lakh need not file returns
NEW DELHI: Salary earners having an income of less than Rs 5 lakh will not have to file tax returns from this year, a finance ministry official said.
"Salaried people, may be up to Rs 5 lakh...they need not file the (income tax) return," CBDT chairman Sudhir Chandra told reporters at the customary post-Budget press conference.
The exemption from filing tax returns come into effect from the assessment year 2011-12.
In case such a salary earner has income from other sources like dividend, interest etc. and does not want to file returns, he will have to disclose such income to his employer for tax deduction, Chandra said.
The government, he said, is working out a scheme and will notify it "very soon".
The Form 16 issued to salaried employees will be treated as Income Tax Return, he added.
Earlier, in the day, finance minister Pranab Mukherjee had proposed to exempt salaried employees from filing tax returns.
According to the Memorandum to the Finance Bill 2011, the government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.
The decision, which will come into effect from June 1, 2011, will reduce the compliance burden on small taxpayers, it added.
Every person whose income exceeds the taxable limit is presently required to file returns.
Another finance ministry official said the decision to raise tax exemption limit of very senior citizens (80 years above) to Rs 5 lakh will benefit about 15,000 tax payers.
Mukherjee announced an increase in the income tax limit of very senior citizens to Rs 5 lakh. They will have to pay a tax of 20% for income between Rs 5 lakh and Rs 8 lakh and 30 per cent beyond Rs 8 lakh.
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"Salaried people, may be up to Rs 5 lakh...they need not file the (income tax) return," CBDT chairman Sudhir Chandra told reporters at the customary post-Budget press conference.
The exemption from filing tax returns come into effect from the assessment year 2011-12.
In case such a salary earner has income from other sources like dividend, interest etc. and does not want to file returns, he will have to disclose such income to his employer for tax deduction, Chandra said.
The government, he said, is working out a scheme and will notify it "very soon".
The Form 16 issued to salaried employees will be treated as Income Tax Return, he added.
Earlier, in the day, finance minister Pranab Mukherjee had proposed to exempt salaried employees from filing tax returns.
According to the Memorandum to the Finance Bill 2011, the government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.
The decision, which will come into effect from June 1, 2011, will reduce the compliance burden on small taxpayers, it added.
Every person whose income exceeds the taxable limit is presently required to file returns.
Another finance ministry official said the decision to raise tax exemption limit of very senior citizens (80 years above) to Rs 5 lakh will benefit about 15,000 tax payers.
Mukherjee announced an increase in the income tax limit of very senior citizens to Rs 5 lakh. They will have to pay a tax of 20% for income between Rs 5 lakh and Rs 8 lakh and 30 per cent beyond Rs 8 lakh.
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Union Budget 2011: FM pushes for affordable homes; full tax rebate to builders
NEW DELHI: Finance minister Pranab Mukherjee presented Union Budget 2011 in Parliament today.
OVERVIEW: Budget estimates for 2011-12 projects Rs 9,32,440 crore - an increase of 24 per cent.
Expenditure in 2011-12 is estimated at Rs 12,57,729 crore, an increase of 13.4%.
Revenue deficit fixed at 2.3% in revised estimates of 2010-11 and 1.8% in 2011-12.
Tax reductions to result in revenue loss of Rs 11,500 crore
INFLATION: The finance minister opened his speech with reference to inflation saying that food inflation came down from 20.2% last year to 9.3% in January 2011 but it was still a matter of concern. "Government's principle concern is high food prices... food prices were high for cereals, there was a spurt in prices of onions and milk," he said. ( Inflation remains principal concern, to fall next year )
AGRICULTURE: In what may be a big relief for farmers, the FM said credit flows to farmers will be raised from Rs 3.75 lakh crore to Rs 4.75 lakh crores and the allocation under Rashtriya Krishi Vikas Yojana will be raised from Rs 6755 crore in the current year to Rs 7860 crore. ( Farm loans at 4%; credit target raised to Rs 4,75,000cr )
An additional Rs 300 cr will be provided to promote pulses cultivation in rain-fed areas and another Rs 300 cr to promote farm product cultivation.
In joy for anganwadi workers, their remuneration is being raised from Rs 1500 to Rs 3,000 per month. Anganwadi helpers will get Rs 1,500 from Rs 750, Pranab said. ( Social spending to be raised by 17% )
Old age pension to persons of over the age of 80 will be raised from Rs 200 to Rs 500.
HEALTH: 20 percent hike in health budget for 2011-2012. (Finance minister announces 20 per cent hike in health budget)
(
Healthcare industry fumes at Budget)
DEFENCE: The finance minister has allotted Rs 1.64 lakh crore for defence saying that more will be given if required. (11% hike in defence allocation)
Rs 9 lakh compensation will be given to men of defence and central paramilitary forces for permanent disability and on being discharged from service. (Rs 9 lakh disability compensation for defence personnel)
INCOME TAX: No change in tax slabs has been proposed. The tax exemption limit for general category has been raised from Rs 1,60,000 to Rs 1,80,000. ( Tax limit enhanced from Rs 1,60,000 to Rs 1,80,000)
No change in tax exemption limit for women.
For senior citizens, exemption age limit has been reduced from 65 to 60. Their tax exemption limit will be Rs 2,50,000.
Apart from this, a new exemption bracket has been created for those above 80 years of age. Their tax exemption limit will be Rs 5,00,000.
Surcharge for companies cut to 5 per cent, from 7.5 per cent. (Corporate Tax surcharge reduced to 5%)
A new revised income tax return form 'Sugam' to be introduced for small tax papers.
DIRECT TAX: The FM announced that Direct Tax Code will be implemented from April, 2012 and the Goods and Services Tax Bill is to be introduced in Parliament this year. ( Direct Taxes Code to be implemented from April 1, 2012 )
Goods and services tax bill in budget session: Pranab Mukherjee
SERVICE TAX: Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor, some category of hospitals, diagnostic tests.
Service tax on air travel increased by Rs 50 for domestic travel and Rs 250 for international travel in economy class. On higher classes, it will be 10% flat. ( Service tax on air travel increased )
EXCISE AND CUSTOMS DUTY: There is a proposal to introduce self-assessment of customs duty wherein importers and exporters will themselves assess payment of duty.
There will be change in excise duty. The standard rate of central exercise duty will be maintained at 10%. A 1% central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted and there will be no change in CENVAT rates. (Excise duty retained at 10%, more items to be taxed)
A new scheme is to be introduced for refund of service tax on the lines of drawback of duties, he announced. Also, capital investment in fertiliser production will be considered as infrastructure sub-sector, Pranab said.
Tax-free bonds of Rs 30,000 cr will be issued for infrastructure development which will cover Warehousing Corporation, NHAI, IRFC and HUDCO.
EDUCATION: A Rs50cr grant is being allocated to Aligarh Muslim University centres in Murshidabad in West Bengal and Malappuram in Kerala. Also, the government has decided to allot Rs 200 cr to IIT Kharagpur. ( 24% hike in allocation for education )
GROWTH: Predicting growth patterns over the next fiscal, Pranab said the overall economic growth in the current fiscal was expected at 8.6 %, agriculture growth at 5.4 %, industry at 8.1 % and services 9.3 %. In the next fiscal, economic growth was likely to be 9%, he said. ( Economy grew 8.2% in last 2010 quarter )
Pranab said India raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion.
The government, he said, aims to provide Rs 201.5 billion capital infusion in state-run banks in 2011-12 and Rs 3 billion for 60,000 hectares under palm oil plantation
"I see Budget 2011-12 as transition towards more transparent and result-oriented economic management," he said adding that stronger fiscal coordination was needed.
He said that corruption continued to be deterrent in the country's development and had to be fought extensively.
Pranab Mukherjee said the government plans to create a Women Self Help Group development fund with a corpus of Rs 500 crore. There is also a proposal to increase rural housing fund to Rs 3,000 crore. ( Low-cost housing loans of Rs 15 lakh to get 1% interest sop )
He also announced benefits for Below Poverty Line families by allowing direct transfer of subsidies in kerosene and LPG for such individuals.
Also, NABARD capital base will be strengthened and Rs 10,000 cr will be provided to it as short term credit fund.
Pranab announced the formation of Indian micro finance equity with SIDBI at Rs 100 crore. Another Rs 6,000 cr will be given to public sector banks to maintain capital-to-risk assets ratio norms, he said. ( Rs 500 cr for Regional Rural Banks )
A budget allocation of Rs 100 cr has been made for Ladakh and Rs 150 cr for Jammu for implementation of projects identified by taskforce.
TAX REBATE TO BUILDERS
The government proposed full tax rebate on developing such projects under a notified scheme and raised the ceiling of one per cent interest subsidy on home loans upto Rs 15 lakh from the current Rs 10 lakh.
In the Budget for 2011-12, finance minister Pranab Mukherjee proposed 100% tax deductions on capital expenditure to develop affordable houses under government scheme, thus promoting builders to focus more on such homes.
"Considering the importance of housing, I propose investment linked deduction to businesses, which develop affordable housing under a notified scheme," he said.
Currently under the section 35AD of the Income Tax Act, a housing project for slum re-development and rehabilitation is incentivised with 100% tax exemption. ( FM pushes for affordable homes; full tax rebate to builders )
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OVERVIEW: Budget estimates for 2011-12 projects Rs 9,32,440 crore - an increase of 24 per cent.
Expenditure in 2011-12 is estimated at Rs 12,57,729 crore, an increase of 13.4%.
Revenue deficit fixed at 2.3% in revised estimates of 2010-11 and 1.8% in 2011-12.
Tax reductions to result in revenue loss of Rs 11,500 crore
INFLATION: The finance minister opened his speech with reference to inflation saying that food inflation came down from 20.2% last year to 9.3% in January 2011 but it was still a matter of concern. "Government's principle concern is high food prices... food prices were high for cereals, there was a spurt in prices of onions and milk," he said. ( Inflation remains principal concern, to fall next year )
AGRICULTURE: In what may be a big relief for farmers, the FM said credit flows to farmers will be raised from Rs 3.75 lakh crore to Rs 4.75 lakh crores and the allocation under Rashtriya Krishi Vikas Yojana will be raised from Rs 6755 crore in the current year to Rs 7860 crore. ( Farm loans at 4%; credit target raised to Rs 4,75,000cr )
An additional Rs 300 cr will be provided to promote pulses cultivation in rain-fed areas and another Rs 300 cr to promote farm product cultivation.
In joy for anganwadi workers, their remuneration is being raised from Rs 1500 to Rs 3,000 per month. Anganwadi helpers will get Rs 1,500 from Rs 750, Pranab said. ( Social spending to be raised by 17% )
Old age pension to persons of over the age of 80 will be raised from Rs 200 to Rs 500.
HEALTH: 20 percent hike in health budget for 2011-2012. (Finance minister announces 20 per cent hike in health budget)
(
Healthcare industry fumes at Budget)
DEFENCE: The finance minister has allotted Rs 1.64 lakh crore for defence saying that more will be given if required. (11% hike in defence allocation)
Rs 9 lakh compensation will be given to men of defence and central paramilitary forces for permanent disability and on being discharged from service. (Rs 9 lakh disability compensation for defence personnel)
INCOME TAX: No change in tax slabs has been proposed. The tax exemption limit for general category has been raised from Rs 1,60,000 to Rs 1,80,000. ( Tax limit enhanced from Rs 1,60,000 to Rs 1,80,000)
No change in tax exemption limit for women.
For senior citizens, exemption age limit has been reduced from 65 to 60. Their tax exemption limit will be Rs 2,50,000.
Apart from this, a new exemption bracket has been created for those above 80 years of age. Their tax exemption limit will be Rs 5,00,000.
Surcharge for companies cut to 5 per cent, from 7.5 per cent. (Corporate Tax surcharge reduced to 5%)
A new revised income tax return form 'Sugam' to be introduced for small tax papers.
DIRECT TAX: The FM announced that Direct Tax Code will be implemented from April, 2012 and the Goods and Services Tax Bill is to be introduced in Parliament this year. ( Direct Taxes Code to be implemented from April 1, 2012 )
Goods and services tax bill in budget session: Pranab Mukherjee
SERVICE TAX: Service tax widened to cover hotel accommodation above Rs 1,000 per day, A/C restaurants serving liquor, some category of hospitals, diagnostic tests.
Service tax on air travel increased by Rs 50 for domestic travel and Rs 250 for international travel in economy class. On higher classes, it will be 10% flat. ( Service tax on air travel increased )
EXCISE AND CUSTOMS DUTY: There is a proposal to introduce self-assessment of customs duty wherein importers and exporters will themselves assess payment of duty.
There will be change in excise duty. The standard rate of central exercise duty will be maintained at 10%. A 1% central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be exempted and there will be no change in CENVAT rates. (Excise duty retained at 10%, more items to be taxed)
A new scheme is to be introduced for refund of service tax on the lines of drawback of duties, he announced. Also, capital investment in fertiliser production will be considered as infrastructure sub-sector, Pranab said.
Tax-free bonds of Rs 30,000 cr will be issued for infrastructure development which will cover Warehousing Corporation, NHAI, IRFC and HUDCO.
EDUCATION: A Rs50cr grant is being allocated to Aligarh Muslim University centres in Murshidabad in West Bengal and Malappuram in Kerala. Also, the government has decided to allot Rs 200 cr to IIT Kharagpur. ( 24% hike in allocation for education )
GROWTH: Predicting growth patterns over the next fiscal, Pranab said the overall economic growth in the current fiscal was expected at 8.6 %, agriculture growth at 5.4 %, industry at 8.1 % and services 9.3 %. In the next fiscal, economic growth was likely to be 9%, he said. ( Economy grew 8.2% in last 2010 quarter )
Pranab said India raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion.
The government, he said, aims to provide Rs 201.5 billion capital infusion in state-run banks in 2011-12 and Rs 3 billion for 60,000 hectares under palm oil plantation
"I see Budget 2011-12 as transition towards more transparent and result-oriented economic management," he said adding that stronger fiscal coordination was needed.
He said that corruption continued to be deterrent in the country's development and had to be fought extensively.
Pranab Mukherjee said the government plans to create a Women Self Help Group development fund with a corpus of Rs 500 crore. There is also a proposal to increase rural housing fund to Rs 3,000 crore. ( Low-cost housing loans of Rs 15 lakh to get 1% interest sop )
He also announced benefits for Below Poverty Line families by allowing direct transfer of subsidies in kerosene and LPG for such individuals.
Also, NABARD capital base will be strengthened and Rs 10,000 cr will be provided to it as short term credit fund.
Pranab announced the formation of Indian micro finance equity with SIDBI at Rs 100 crore. Another Rs 6,000 cr will be given to public sector banks to maintain capital-to-risk assets ratio norms, he said. ( Rs 500 cr for Regional Rural Banks )
A budget allocation of Rs 100 cr has been made for Ladakh and Rs 150 cr for Jammu for implementation of projects identified by taskforce.
TAX REBATE TO BUILDERS
The government proposed full tax rebate on developing such projects under a notified scheme and raised the ceiling of one per cent interest subsidy on home loans upto Rs 15 lakh from the current Rs 10 lakh.
In the Budget for 2011-12, finance minister Pranab Mukherjee proposed 100% tax deductions on capital expenditure to develop affordable houses under government scheme, thus promoting builders to focus more on such homes.
"Considering the importance of housing, I propose investment linked deduction to businesses, which develop affordable housing under a notified scheme," he said.
Currently under the section 35AD of the Income Tax Act, a housing project for slum re-development and rehabilitation is incentivised with 100% tax exemption. ( FM pushes for affordable homes; full tax rebate to builders )
toi
Stock markets cheer the Budget, Sensex up 122 pts
NEW DELHI: Investors cheered the Budget 2011-12 today pushing up the sensex nearly 600 points before profit-booking erased gains as the BSE benchmark index closed at over 17,823, up about 122 points.
Markets welcomed the budgetary proposals to reduce surcharge on corporate tax to 5 per cent, push reforms and contain inflation, with the Bombay Stock Exchange 30-stock barometer closed with 122.49 points up, at 17,823.40.
The broad-based National Stock Exchange's Nifty also saw an upswing and moved up 29.70 points to 5,333.25, after touching the day's high of 5,477.
"The cut in surcharge on corporate tax and proposals to keep up tempo of disinvestment process, besides raising income tax limit, cheered the trading sentiment," said a chartered accountant Tarun Malik of TCM Associates.
He said a moderate hike in the MAT will not have any impact on the market.
A Delhi-based BSE broker Rajiv Malik said the proposal to issue Rs 30,000 crore bonds for infrastructure development will bring in more liquidity in the equity markets.
Besides, the market sentiment turned bullish on proposals allowing foreign funds to invest individually in domestic mutual funds, paving the way for increased participation in the capital markets.
The upsurge was supported by stocks in FMCG, PSU, Realty, Capital Goods and refinery sectors.
toi
Markets welcomed the budgetary proposals to reduce surcharge on corporate tax to 5 per cent, push reforms and contain inflation, with the Bombay Stock Exchange 30-stock barometer closed with 122.49 points up, at 17,823.40.
The broad-based National Stock Exchange's Nifty also saw an upswing and moved up 29.70 points to 5,333.25, after touching the day's high of 5,477.
"The cut in surcharge on corporate tax and proposals to keep up tempo of disinvestment process, besides raising income tax limit, cheered the trading sentiment," said a chartered accountant Tarun Malik of TCM Associates.
He said a moderate hike in the MAT will not have any impact on the market.
A Delhi-based BSE broker Rajiv Malik said the proposal to issue Rs 30,000 crore bonds for infrastructure development will bring in more liquidity in the equity markets.
Besides, the market sentiment turned bullish on proposals allowing foreign funds to invest individually in domestic mutual funds, paving the way for increased participation in the capital markets.
The upsurge was supported by stocks in FMCG, PSU, Realty, Capital Goods and refinery sectors.
toi
US dollar ends cheaper against rupee
MUMBAI: The US dollar ended cheaper against the rupee at Rs 45.27/28 per dollar and but Pound Sterling turned higher at Rs 73.48/50 per pound at the close of the Interbank Foreign Exchange Market (Forex) here today.
The Following are the Interbank Forex and RBI rates: (In Rs Per Unit) Unit Interbank RBI Reference US Dollar 45.27/28 US Dollar Rs 45.18 Pound Sterling 73.48/50 Euro Rs 62.15. Euro 62.62/64 Japanese Yen (100) 55.27/29
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The Following are the Interbank Forex and RBI rates: (In Rs Per Unit) Unit Interbank RBI Reference US Dollar 45.27/28 US Dollar Rs 45.18 Pound Sterling 73.48/50 Euro Rs 62.15. Euro 62.62/64 Japanese Yen (100) 55.27/29
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Pranab knocks down luxury carmakers
NEW DELHI: Playing a party-pooper to the country's growing clout in the luxury car segment, a new provision in the Budget could well lead to a hefty hike, over Rs 8 lakh or more, in the prices of entry-level cars of the companies like BMW, Audi and Mercedes. In what appears to be a bolt from the blue for the luxury carmakers, mainly from the German stable, a change in definition of completely-knocked down (CKD) car is threatening to derail the softer import duty regime.
The provision, hidden in the memorandum explaining the provisions of the Finance Bill, has created panic among companies like Audi, BMW and Mercedes as they are scared that a jump in the prices of their India-assembled cars will hit demand.
"A definition for 'CKD unit' of a vehicle, including two-wheelers, eligible for concessional import duty is being inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or chassis where any of such parts or sub-assemblies is installed," the Budget provision said.
In simple terms, this implies that auto companies that are doing CKD business in India with fully-imported pre-assembled critical parts like engines or gearbox or transmission cannot claim the lower 10% import duty on them as these will no longer be defined as CKDs. This would bring these vehicles on a par with fully-built units and thus slap a hefty 60% import duty on them, which would go up to 110% after the addition of counter-vailing duty, VAT and other local levies.
The models affected could be all entry-level luxury cars. From BMW, these would include the 3-Series and 5-Series sedans and the X1 SUV; from Mercedes the C- and E-Class sedans; and from Audi the A4 and A6 sedans and the Q5 SUV. Other companies who are having some CKD models will also be affected, and these include Toyota's Fortuner, Volkswagen's Jetta and Passat and Ford's Endeavour.
The affected companies have approached the auto industry body Society of Indian Automobile Manufacturers (Siam) for help. "A delegation of our representatives and Siam have visited the finance ministry to seek clarification on the matter," an official with one of the luxury carmaker said.
While none of them are ready to speak on record at the moment, they say in private that business would be severely affected if the provision is enforced. "Sales will be hit as affordability goes down. This kind of a provision, if it is there to stay, will be negative for further investments," said an official, requesting anonymity.
Sources said the German embassy has also been alerted on the matter and is actively looking into the issue. Comfortable prices of luxury cars and growing affluence in India have seen sales of luxury cars zoom. Companies like BMW, Mercedes and Audi have seen India emerge as one of their fastest-growing markets globally (over 70% growth), though volumes are still at a nascent stage. The total market for luxury cars was about 18,000 units last year, and is expected to double in the next two-to-three years if the lower duty regime stays. "However, all the projections would go haywire in case the new provision is enforced," an official said.
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The provision, hidden in the memorandum explaining the provisions of the Finance Bill, has created panic among companies like Audi, BMW and Mercedes as they are scared that a jump in the prices of their India-assembled cars will hit demand.
"A definition for 'CKD unit' of a vehicle, including two-wheelers, eligible for concessional import duty is being inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or chassis where any of such parts or sub-assemblies is installed," the Budget provision said.
In simple terms, this implies that auto companies that are doing CKD business in India with fully-imported pre-assembled critical parts like engines or gearbox or transmission cannot claim the lower 10% import duty on them as these will no longer be defined as CKDs. This would bring these vehicles on a par with fully-built units and thus slap a hefty 60% import duty on them, which would go up to 110% after the addition of counter-vailing duty, VAT and other local levies.
The models affected could be all entry-level luxury cars. From BMW, these would include the 3-Series and 5-Series sedans and the X1 SUV; from Mercedes the C- and E-Class sedans; and from Audi the A4 and A6 sedans and the Q5 SUV. Other companies who are having some CKD models will also be affected, and these include Toyota's Fortuner, Volkswagen's Jetta and Passat and Ford's Endeavour.
The affected companies have approached the auto industry body Society of Indian Automobile Manufacturers (Siam) for help. "A delegation of our representatives and Siam have visited the finance ministry to seek clarification on the matter," an official with one of the luxury carmaker said.
While none of them are ready to speak on record at the moment, they say in private that business would be severely affected if the provision is enforced. "Sales will be hit as affordability goes down. This kind of a provision, if it is there to stay, will be negative for further investments," said an official, requesting anonymity.
Sources said the German embassy has also been alerted on the matter and is actively looking into the issue. Comfortable prices of luxury cars and growing affluence in India have seen sales of luxury cars zoom. Companies like BMW, Mercedes and Audi have seen India emerge as one of their fastest-growing markets globally (over 70% growth), though volumes are still at a nascent stage. The total market for luxury cars was about 18,000 units last year, and is expected to double in the next two-to-three years if the lower duty regime stays. "However, all the projections would go haywire in case the new provision is enforced," an official said.
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Union Budget 2011: Highlights
OPPORTUNITIES
- Swift and broad based growth in 2010-11 has put the economy back to its pre-crisis growth trajectory. Fiscal consolidation has been impressive.
- Significant progress in critical institutional reforms that would set the pace for double-digit growth in the near future.
- Dynamism in the rural economy due to scaled up flow of resources to the rural areas.
CHALLENGES
- Structural concerns on inflation management to be addressed by improving supply response of agriculture to the expanding domestic demand and through stronger fiscal consolidation.
- Implementation gaps, leakages from public programmes and the quality of outcomes pose a serious challenge.
- Impression of drift in governance and gap in public accountability is misplaced.
- Corruption as a problem to be fought collectively. Government to improve the regulatory standards and administrative practices.
- Inputs from colleagues on both sides of House are important in the wider national interest.
- Budget 2011-12 to serve as a transition towards a more transparent and result oriented economic management system in India.
OVERVIEW OF THE ECONOMY
- Gross Domestic Product (GDP) estimated to have grown at 8.6 per cent in 2010-11 in real terms. Economy has shown remarkable resilience.
- Continued high food prices have been principal concern this year.
- Consumers denied the benefit of seasonal fall in prices despite improved availability of food items, revealing shortcomings in distribution and marketing systems.
- Monetary policy measures taken expected to further moderate inflation in coming months.
- Exports have grown by 29.4 per cent, while imports have recorded a growth of 17.6 per cent during April to January 2010-11 over the corresponding period last year.
- Indian economy expected to grow at 9 per cent with an outside band of +/- 0.25 per cent in 2011-12.
- Average inflation expected lower next year and current account deficit smaller.
SUSTAINING GROWTH
Fiscal consolidation
- Fiscal consolidation targets at Centre and States have shown positive effect on macro economic management of the economy.
- Amendment to Centre’s FRBM Act, 2003 laying down the fiscal road map for the next five years to be introduced in the course of the year.
- Proposal to introduce the Public Debt Management Agency of India Bill in the next financial year.
Tax Reforms
- Direct Taxes Code (DTC) to be finalised for enactment during 2011-12. DTC proposed to be effective from April 1, 2012.
- Areas of divergence with States on proposed Goods and Services Tax (GST) have been narrowed. As a step towards roll out of GST, Constitution Amendment Bill proposed to be introduced in this session of Parliament.
- Significant progress in establishing GST Network (GSTN), which will serve as IT infrastructure for introduction of GST.
Expenditure Reforms
- A Committee already set up by Planning Commission to look into the extant classification of public expenditure between plan, non-plan, revenue and capital.
Subsidies
- Nutrient Based Subsidy (NBS) has improved the availability of fertiliser; Government actively considering extension of the NBS regime to cover urea.
- Government to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner for better delivery of kerosene, LPG and fertilisers. Task force set up to work out the modalities for the proposed system.
People’s ownership of PSUs
- Overwhelming response to public issues of Central Public Sector Undertakings during current year.
- Higher than anticipated non-tax revenue has led to reschedulement of some disinvestment issues planned for current year.
- Rs. 40,000 crore to be raised through disinvestment in 2011-12.
- Government committed to retain at least 51 per cent ownership and management control of the Central Public Sector Undertakings.
INVESTMENT ENVIRONMENT
Foreign Direct Investment
- Discussions underway to further liberalise the FDI policy.
Foreign Institutional Investors
- SEBI registered mutual funds permitted to accept subscription from foreign investors who meet KYC requirements for equity schemes.
- To enhance flow of funds to infrastructure sector, the FII limit for investment in corporate bonds issued in infrastructure sector being raised.
Financial Sector Legislative Initiatives
- To take the process of financial sector reforms further, various legislations proposed in 2011-12.
- Amendments proposed to the Banking Regulation Act in the context of additional banking licences to private sector players.
Public Sector Bank Capitalisation
- Rs. 6,000 crore to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8 per cent.
Recapitalisation of Regional Rural Banks
- Rs. 500 crore to be provided to enable Regional Rural Banks to maintain a CRAR of at least 9 per cent as on March 31, 2012.
Micro Finance Institutions
- “India Microfinance Equity Fund” of Rs. 100 crore to be created with SIDBI.
- Government considering putting in place appropriate regulatory framework to protect the interest of small borrowers.
- “Women’s SHG’s Development Fund” to be created with a corpus of Rs. 500 crore.
Rural Infrastructure Development Fund
- Corpus of RIDF XVII to be raised from Rs. 16,000 crore to Rs. 18,000 crore.
Micro Small and Medium Enterprises
- Rs. 5,000 crore to be provided to SIDBI for refinancing incremental lending by banks to these enterprises.
- Rs3,000 crore to be provided to NABARD to provide support to handloom weaver co-operative societies which have become financially unviable due to non-repayment of debt by handloom weavers facing economic stress.
- Public sector banks to achieve a target of 15 per cent as outstanding loans to minority communities under priority sector lending at the earliest.
Housing Sector Finance
- Existing scheme of interest subvention of 1 per cent on housing loan further liberalised.
- Existing housing loan limit enhanced to Rs. 25 lakh for dwelling units under priority sector lending.
- Provision under Rural Housing Fund enhanced to Rs. 3,000 crore.
- To enhance credit worthiness of economically weaker sections and LIG households, a Mortgage Risk Guarantee Fund to be created under Rajiv Awas Yojana.
- Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property to become operational by March 31, 2011.
Financial Sector Legislative Reforms Commission
- Financial Sector Legislative Reforms Commission set up to rewrite and streamline the financial sector laws, rules and regulations.
- Companies Bill to be introduced in the Lok Sabha during current session.
AGRICULTURE
- Removal of production and distribution bottlenecks for items like fruits and vegetables, milk, meat, poultry and fish to be the focus of attention this year.
- Allocation under Rashtriya Krishi Vikas Yojana (RKVY) increased from Rs. 6,755 crore to Rs. 7,860 crore.
Bringing Green Revolution to Eastern Region
- To improve rice based cropping system in this region, allocation of Rs. 400 crore has been made.
Integrated Development of 60,000 pulses villages in rainfed areas
- Allocation of Rs. 300 crore to promote 60,000 pulses villages in rainfed areas.
Promotion of Oil Palm
- Allocation of Rs. 300 crore to bring 60,000 hectares under oil palm plantations.
- Initiative to yield about 3 lakh Metric tonnes of palm oil annually in five years.
Initiative on Vegetable Clusters
- Allocation of Rs. 300 crore for implementation of vegetable initiative to provide quality vegetable at competitive prices.
Nutri-cereals
- Allocation of Rs. 300 crore to promote higher production of Bajra, Jowar, Ragi and other millets, which are highly nutritious and have several medicinal properties.
National Mission for Protein Supplement
- Allocation of Rs. 300 crore to promote animal based protein production through livestock development, dairy farming, piggery, goat rearing and fisheries.
Accelerated Fodder Development Programme
- Allocation of Rs. 300 crore for Accelerated Fodder Development Programme to benefit farmers in 25,000 villages.
National Mission for Sustainable Agriculture
- Government to promote organic farming methods, combining modern technology with traditional farming practices.
Agriculture Credit
- Credit flow for farmers raised from Rs. 3,75,000 crore to Rs. 4,75,000 crore in 2011-12.
- Interest subvention proposed to be enhanced from 2 per cent to 3 per cent for providing short-term crop loans to farmers who repay their crop loan on time.
- In view of enhanced target for flow of agriculture credit, capital base of NABARD to be strengthened by Rs. 3,000 crore in phased manner.
- Rs. 10,000 crore to be contributed to NABARD’s Short-term Rural Credit fund for 2011-12.
Mega Food Parks
- Approval being given to set up 15 more Mega Food Parks during 2011-12.
Storage Capacity and Cold Chains
- Augmentation of storage capacity through private entrepreneurs and warehousing corporations has been fast tracked.
- Capital investment in creation of modern storage capacity will be eligible for viability gap funding of the Finance Ministry.
Agriculture Produce Marketing Act
- In view of recent episode of inflation, need for State Governments to review and enforce a reformed Agriculture Produce Marketing Act.
Infrastructure and Industry
- Allocation of Rs. 2,14,000 crore for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11. This also amounts to 48.5 per cent of total plan allocation.
- Government to come up with a comprehensive policy for further developing PPP projects.
- IIFCL to achieve cummulative disbursement target of Rs. 20,000 crore by March 31, 2011 and Rs. 25,000 crore by March 31, 2012.
- Under take out financing scheme, seven projects sanctioned with debt of Rs. 1,500 crore. Another Rs. 5,000 crore will be sanctioned during 2011-12.
- To boost infrastructure development, tax free bonds of Rs. 30,000 crore proposed to be issued by Government undertakings during 2011-12.
National Manufacturing Policy
- Share of manufacturing in GDP expected to grow from about 16 per cent to 25 per cent over a period of 10 years. Government will come out with a manufacturing policy.
- Two Committees set up for greater transparency and accountability in procurement policy; and for allocation, pricing and utilisation of natural resources.
- Issues relating to reconciliation of environmental concern from various departmental activities including those related to infrastructure and mining to be considered by a Group of Ministers.
- National Mission for hybrid and electric vehicle to be launched.
- Financial Assistance to be made available for metro projects in Delhi, Mumbai, Bengaluru, Kolkata and Chennai.
- Capital investment in fertiliser production proposed to be included as an infrastructure sub-sector.
Exports
- Of 23 suggestions made by Task Force on Transaction Cost, constituted by the Department of Commerce, 21 suggestions already implemented. Action to be taken on the remaining two suggestions. Transaction Cost of Rs. 2,100 crore will thus be mitigated.
- Self assessment to be introduced in Customs to modernize the Customs administration.
- Proposal to introduce scheme for refund of taxes paid on services used for export of goods.
- Mega Cluster Scheme to be extended for leather products. Seven mega leather clusters to be set up during 2011-12.
- Jodhpur to be included for the development of a handicraft mega cluster.
BLACK MONEY
- Five fold strategy to be put into operation to deal with the problem of generation and circulation of black money.
- Membership of various international fora engaged in anti money laundering, Financial integrity and Economic development, Exchange of information for tax purposes and transparency, secured.
Various Tax Information Exchange Agreements (TIEA) and Double Taxation
- Avoidance Agreements (DTAA) concluded. Foreign Tax Division of CBDT has been strengthened to effectively handle increase in tax information exchange and transfer pricing issues.
- Enforcement Directorate strengthened three fold to handle increased number of cases registered under amended Money Laundering Legislation.
- Finance Ministry has commissioned study on unaccounted income and wealth held within and outside the country.
- Comprehensive national policy to be announced in near future to strengthen controls over prevention of trafficking on narcotic drugs.
STRENGTHENING INCLUSION
- National Food Security Bill (NFSB) to be introduced in the Parliament during the course of this year.
- Allocation for social sector in 2011-12 (Rs. 1,60,887 crore) increased by 17 per cent over current year. It amounts to 36.4 per cent of total plan allocation.
Bharat Nirman
- Allocation for Bharat Nirman programme proposed to be increased by Rs10,000 crore from the current year to Rs. 58,000 crore in 2011-12.
- Plan to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.
MGNREGA
- In pursuance of last years budget announcement to provide a real wage of Rs100 per day, the Government has decided to index the wage rates notified under the
- MGNREGA to the Consumer Price Index for Agricultural Labour. The enhanced wage rates have been notified by the Ministry of Rural Development on January 14, 2011.
- From 1st April, 2011, remuneration of Anganwadi workers increased from Rs1,500 per month to Rs. 3,000 per month and for Anganwadi helpers from Rs. 750 per month to Rs. 1,500 per month.
Scheduled Castes and Tribal Sub-plan
- Specific allocation earmarked towards Schedule Castes Sub-plan and Tribal Sub-plan in the Budget.
- Allocation for primitive Tribal groups increased from Rs. 185 crore in 2010-11 to Rs. 244 crore in 2011-12.
Education
- Allocation for education increased by 24 per cent over current year.
Sarva Shiksha Abhiyan
- Rs. 21,000 crore allocated, which is 40 per cent higher than Budget for 2010-11.
- Pre-matric scholarship scheme to be introduced for needy SC/ST students studying in classes IX and X.
National Knowledge Network
- Connectivity to all 1,500 institutions of Higher Learning and Research through optical fiber backbone to be provided by March, 2012.
Innovations
- National Innovation Council set up to prepare road map for innovations in India.
- Special grant provided to various universities and academic institutions to recognise excellence.
Skill Development
- Additional Rs. 500 crore proposed to be provided for National Skill Development Fund during the next year.
- An international award with prize money of Rs. 1 crore being instituted for promoting values of universal brotherhood as part of National celebrations of 150th Birth Anniversary of Gurudev Rabindranath Tagore.
Health
- Plan allocations for health stepped-up by 20 per cent.
- Scope of Rashtriya Swasthya Bima Yojana to be expanded to widen the coverage.
Financial Inclusion
- Target of providing banking facilities to all 73,000 habitations having a population of over 2,000 to be completed during 2011-2012.
Unorganised sector
- Exit norms under co-contributory pension scheme “Swavalamban” to be relaxed.
- Benefit of Government contribution to be extended from three to five years for all subscribers who enroll during 2010-11 and 2011-12.
- Eligibility for pension under Indira Gandhi National Old Age Pension Scheme for BPL beneficiaries reduced from 65 years of age to 60 years. Those above 80 years of age will get pension of Rs. 500 per month instead of Rs. 200 at present.
Environment and Climate Change
Forests
- Rs. 200 crore proposed to be allocated for Green India Mission from National Clean Energy Fund.
Environmental Management
- Rs. 200 crore proposed to be allocated for launching Environmental Remediation Programmes from National Clean Energy Fund.
Cleaning of Rivers and Lakes
- Special allocation of Rs. 200 crore proposed to be provided for clean-up of some more important lakes and rivers other than Ganga.
Some Other Initiatives
- To boost development in North Eastern Region and Special Category States, allocation for Special Assistance doubled.
- Rs. 8,000 crore provided in current year for development needs of Jammu and Kashmir.
- Allocation made in 2011-12 to meet the infrastructure needs for Ladakh (Rs. 100 crore) and Jammu region (Rs. 150 crore).
- Allocation under Backward Regions Grant Fund increased by over 35 per cent.
- Funds allocated under Integrated Action Plan (IAP) for addressing problems related to Left Wing extremism affected districts. 60 selected Tribal and backward districts provided with 100 per cent block grant of Rs. 25 crore and Rs. 30 crore per district during 2010-11 and 2011-12 respectively.
- A lump-sum ex-gratia compensation of Rs. 9 lakh for 100 per cent disability to be granted for personnel of Defence and Para Military forces discharged from service on medical ground on account of disability attributable to government service.
- Provision of Rs. 1,64,415 crore, including Rs. 69,199 crore for capital expenditure to be made for Defence Services in 2011-12.
- To build judicial infrastructure, plan provision for Department of Justice increased by three fold to Rs. 1,000 crore.
Census 2011
- To enumerate castes other than Schedule Castes and Schedule Tribes in Census 2011, ‘caste’ to be canvassed as a separate time bound exercise.
IMPROVING GOVERNANCE
UID Mission
- From 1st October, 2011 ten lakh Aadhaar numbers will be generated per day.
IT Initiatives
- Various IT initiatives taken for efficient tax administration. These include e-filing and e-payment of taxes, adoption of ‘Sevottam’ concept by CBEC and CBDT, web based facility for tax payers to track the resolution of refunds and credit for pre-paid taxes and augmentation of processing capacity.
- Under Mission mode projects, funds released to 31 projects received from States/ UTs for computerisation of Commercial taxes. This will allow States to align with roll out of GST.
- Bill to amend the Indian Stamp Act proposed to be introduced shortly.
- A new scheme with an outlay of Rs. 300 crore to be launched to provide assistance to States to modernise their stamp and registration administration and roll out e-stamping in all the districts in the next three years.
- A new simplified form ‘Sugam’ to be introduced to reduce the compliance burden of small tax payers falling within presumptive taxation.
- Three more benches of Settlement Commission to be set up to fast track the disposal of cases.
- Steps initiated to reduce litigation and focus attention on high revenue cases.
Corruption
- Group of Ministers constituted to consider measures for tackling corruption.
- Recommendations to be made in a time bound manner.
- Performance Monitoring and Evaluation System
- In pursuance of recommendations of Second Administrative Reforms
- Commission, 62 departments covered under Performance Monitoring and Evaluation System (PMES) to assess their effectiveness.
TAGUP
- Recommendations of Technology Advisory Group for Unique Projects (TAGUP) submitted and accepted in principle.
BUDGET ESTIMATES 2011-12
- Gross Tax receipts are estimated at Rs. 9,32,440 crore.
- Non-tax revenue receipts estimated at Rs. 1,25,435 crore.
- Total expenditure proposed at Rs. 12,57,729 crore.
- Increase of 18.3 per cent in total Plan allocation.
- Increase of 10.9 per cent in the Non-plan expenditure.
- XI Plan expenditure more than 100 per cent in nominal terms than envisaged for the Plan period.
- Increase of 23 per cent in Plan and Non-plan transfer to States and UTs.
- Fiscal Deficit brought down from 5.5 per cent in BE 2010-11 to 5.1 per cent of GDP in RE 2010-11.
- Fiscal Deficit kept at 4.6 per cent of GDP for 2011-12.
- Fiscal Deficit to be progressively reduced to 3.5 per cent by 2013-14.
- “Effective Revenue Deficit” estimated at 2.3 per cent of GDP in the Revised
- Estimates for 2010-11 and 1.8 per cent for 2011-12.
- All subsidy related liabilities brought into fiscal accounting.
- Net market borrowing of the Government through dated securities in 2011-12 would be Rs. 3.43 lakh crore.
- Central Government debt estimated at 44.2 per cent of GDP for 2011-12 as against 52.5 per cent recommened by the 13th Finance Commission.
PART B TAX PROPOSALS
Direct Taxes
- Exemption limit for the general category of individual taxpayers enhanced from
- Rs. 1,60,000 to Rs. 1,80,000 giving uniform tax relief of Rs. 2,000.
- Exemption limit enhanced and qualifying age reduced for senior citizens.
- Higher exemption limit for Very Senior Citizens, who are 80 years or above.
- Current surcharge of 7.5 per cent on domestic companies proposed to be reduced to 5 per cent.
- Rate of Minimum Alternative Tax proposed to be increased from 18 per cent to 18.5 per cent of book profits.
- Tax incentives extended to attract foreign funds for financing of infrastructure.
- Additional deduction of Rs. 20,000 for investment in long-term infrastructure bonds proposed to be extended for one more year.
- Lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary.
- Benefit of investment linked deduction extended to businesses engaged in the production of fertilisers.
- Investment linked deduction to businesses developing affordable housing.
- Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.
- System of collection of information from foreign tax jurisdictions to be strengthened.
- A net revenue loss of Rs. 11,500 crore estimated as a result of proposals.
Indirect Taxes
- To stay on course for transition to GST.
- Central Excise Duty to be maintained at standard rate of 10 per cent.
- Reduction in number of exemptions in Central Excise rate structure.
- Nominal Central Excise Duty of 1 per cent imposed on 130 items entering in the tax net.
- Lower rate of Central Excise Duty enhanced from 4 per cent to 5 per cent.
- Optional levy on branded garments or made up proposed to be converted into a mandatory levy at unified rate of 10 per cent.
- Peak rate of Custom Duty held at its current level.
Agriculture and Related Sectors
- Scope of exemptions from Excise Duty enlarged to include equipments needed for storage and warehouse facilities on agricultural produce.
- Basic Custom Duty reduced for specified agricultural machinery from 5 per cent to 2.5 per cent.
- Basic Custom Duty reduced on micro-irrigation equipment from 7.5 per cent to 5 per cent.
- De-oiled rice bran cake to be fully exempted from basic Custom Duty. Export
- Duty of 10 per cent to be levied on its export.
Manufacturing Sector
- Basic Custom Duty reduced for various items to encourage domestic value addition vis-à-vis imports, to remove duty inversion and anomalies and to provide a level playing field to the domestic industry.
- Rate of Export Duty for all types of iron ore enhanced and unified at 20 per cent ad valorem. Full exemption from Export Duty to iron ore pellets.
- Basic Custom Duty on two critical raw materials of cement industry viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent.
- Cash dispensers fully exempt from basic Customs Duty.
Environment
- Full exemption from basic Customs Duty and a concessional rate of Central
- Excise Duty extended to batteries imported by manufacturers of electrical vehicles.
- Concessional Excise Duty of 10 per cent to vehicles based on Fuel cell technology.
- Exemption granted from basic custom duty and special CVD to critical parts/assemblies needed for Hybrid vehicles.
- Reduction in Excise Duty on kits used for conversion of fossil fuel vehicles into Hybrid vehicles.
- Excise Duty on LEDs reduced to 5 per cent and special CVD being fully exempted.
- Basic Customs Duty on solar lantern reduced from 10 to 5 per cent.
- Full exemption from basic Customs Duty to Crude Palm Stearin used in manufacture of laundry soap.
- Full exemption from basic Excise Duty granted to enzyme based preparation for pre-tanning.
Infrastructure
- Parallel Excise Duty exemption for domestic suppliers producing capital goods needed for expansion of existing mega or ultra mega power projects.
- Full exemption from basic Customs Duty to bio-asphalt and specified machinery for application in the construction of national highways.
Other Proposals
- Scope of exemptions from basic Customs Duty for work of art and antiquities extended to apply for exhibition or display in private art galleries open to the general public.
- Exemption from Import Duty for spares and capital goods required for ship repair units extended to import by ship owners.
- Concessional basic Custom Duty of 5 per cent and CVD of 5 per cent available to newspaper establishments for high speed printing presses extended to mailroom equipment.
- Jumbo rolls of cinematographic film fully exempted from CVD by providing full exemption from Excise Duty.
- Out right concession to factory-built ambulances from Excise Duty.
- Relief measures proposed for raw pistachio, bamboo for agarbatti, lactose for the manufacture of homoeopathic medicines, sanitary napkins, baby and adult diapers.
- Proposals relating to Customs and Central Excise estimated to result in a net revenue gain of Rs. 7,300 crore.
Service Tax
- Standard rate of Service Tax retained at 10 per cent, while seeking a closer fit between present regime and its GST successor.
- Hotel accommodation in excess of Rs. 1,000 per day and service provided by air conditioned restaurants that have license to serve liquor added as new services for levying Service Tax.
- Tax on all services provided by hospitals with 25 or more beds with facility of central air conditioning.
- Service Tax on air travel both domestic and international raised.
- Services provided by life insurance companies in the area of investment and some more legal services proposed to be brought into tax net.
- All individual and sole proprietor tax payers with a turn over upto Rs. 60 lakh freed from the formalities of audit.
- To encourage voluntary compliance the penal provision for Service Tax are being rationalised. Similar changes being carried out in Central Excise and Custom laws.
- Proposals relating to Service Tax estimated to result in net revenue gain of Rs. 4,000 crore.
- Proposals relating to Direct Taxes estimated to result in a revenue loss of Rs11,500 crore and those related to Indirect Taxes estimated to result in net revenue gain of Rs. 11,300 crore.
Budget 2011: No major tax proposal for banking industry
Though in terms of fiscal measures there is no significant proposal in the Finance Bill that could impact the tax regime for the banking industry, on policy front the changes to Banking regulations through a new Amendment Bill to be moved by the Finance Minister should bring about some of the key changes proposed by the Reserve Bank of India and the ones the industry has been waiting for, including the ones relating to restrictions on voting rights and ceiling in foreign investment in private sector banks.
There was an expectation of the Banking Industry from the Finance Minister that an express exemption from taxes should have been provided on conversion of a foreign bank branch in India to a wholly owned subsidiary, which has not been discussed by the Finance Minister in Budget 2011. These changes along with the other legislative changes referred to by the Finance Minister in his speech should provide the required impetus to the financial markets in general.
There was an expectation of the Banking Industry from the Finance Minister that an express exemption from taxes should have been provided on conversion of a foreign bank branch in India to a wholly owned subsidiary, which has not been discussed by the Finance Minister in Budget 2011. These changes along with the other legislative changes referred to by the Finance Minister in his speech should provide the required impetus to the financial markets in general.
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