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INDIRECT TAX
Indian Budget 2010-11- Full Text- February 26, 2010
141. The major objectives that have guided me in the formulation of my proposals on indirect taxes are the need to achieve some degree of fiscal consolidation without impairing the recovery process and moving forward on the road to GST.
142. Unlike the time I presented the last Budget, symptoms of economic recovery are more widespread and clear-cut now. The three fiscal stimulus packages that the Government introduced in quick succession have helped the process of recovery significantly. The improvement in our economic performance encourages a course of fiscal correction even as the global situation warrants caution. Therefore, I propose to partially roll back the rate reduction in Central Excise duties and enhance the standard rate on all non-petroleum products from 8 per cent to 10 per cent ad valorem. The specific rates of duty applicable to portland cement and cement clinker are also being adjusted upwards proportionately. Similarly, the ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles which was reduced as part of the first stimulus package, is being increased by 2 percentage points to 22 per cent.
143. In the wake of spiralling petroleum prices, Government provided full exemption from basic customs duty to crude petroleum and proportionately reduced the basic duty on refined petroleum products in June, 2008. Compared to the international price of the Indian crude basket of US$ 112 per barrel at that time, the prices are much softer at present. In view of the pressing need to move back to a fiscal consolidation path, I propose to restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. I also propose to enhance the Central Excise duty on petrol and diesel by Re.1 per litre each.
144. Since I quit smoking many years ago, I would urge others to also follow suit, as smoking is injurious to health. To this end, I am making some structural changes in the excise duty on cigarettes, cigars and cigarillos coupled with some increase in rates. I also propose to enhance excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc. In addition, I propose to introduce a compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines.
145. Let me now turn to some much-needed incentives in thrust areas for sustainable growth and development.
Agriculture & Related Sectors
146. In supporting the strategy outlined for development of agriculture earlier in my speech, I propose to address a few key areas that call for focused attention. These are:
(i) A strong supply chain for perishable farm produce to reach consumption and processing centres promptly;
(ii) Infrastructure and technology to convert such produce into value-added products; and
(iii) Infusion of technology to augment agricultural production.
147. Similar attention needs to be paid to related sectors such as apiary, horticulture, dairy, poultry, meat, marine and aquaculture.
148. For achieving these objectives, I propose to provide:
• project import status with a concessional import duty of 5 per cent for the setting up of mechanised handling systems and pallet racking systems in 'mandis' or warehouses for food grains and sugar as well as full exemption from service tax for the installation and commissioning of such equipment.
• project import status at a concessional customs duty of 5 per cent with full exemption from service tax to the initial setting up and expansion of
» Cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce ; and
» Processing units for such produce.
• full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks.
149. I also propose to provide:
• concessional customs duty of 5 per cent to specified agricultural machinery not manufactured in India;
• central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce; and
• full exemption from excise duty to trailers and semi-trailers used in agriculture.
150. Concessional import duty was provided to specified machinery for use in the plantation sector in the year 2003. This exemption is to lapse in July 2010. The modernization of this labour-intensive sector is yet to reach the expected level. I propose therefore, to extend it up to March 31, 2011 along with a CVD exemption. I hope this will provide sufficient time for the sector to achieve the desired objective.
151. One of the prerequisites for agricultural productivity is access to good quality and disease-resistant seeds. I propose to exempt the testing and certification of agricultural seeds from service tax.
152. I also propose to exempt the transportation by road of cereals and pulses from service tax. Their transportation by rail would remain exempt.
153. I propose two measures under the Central Excise law to ease the cash flow position for small-scale manufacturers hard hit by the economic slowdown. First, they would be permitted to take full credit of Central Excise duty paid on capital goods in a single instalment in the year of their receipt. Secondly, they would be permitted to pay Central Excise duty on a quarterly, rather than monthly basis. These measures that come into effect on the April 1, 2010 should provide them considerable relief.
Environment
154. Harnessing renewable energy sources to reduce dependence on fossil fuels is now recognised as a credible strategy for combating global warming and climate change. To build the corpus of the National Clean Energy Fund announced earlier, I propose to levy a clean energy cess on coal produced in India at a nominal rate of Rs.50 per tonne. This cess will also apply to imported coal.
155. In pursuance of Government's resolve to implement the National Solar Mission, I propose to provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units. I also propose to exempt them from Central Excise duty. Similarly, ground source heat pumps used to tap geo-thermal energy would be exempt from basic customs duty and special additional duty.
156. Wind energy has shown promising growth in the country in recent years. As a measure of further relief, I propose to exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty.
157. LED lights are staging a debut as a highly energy-efficient source of lighting for streets, homes and offices. Central Excise duty on these is being reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps.
158. Full exemption from Central Excise duty was provided to electric cars and vehicles that offer an eco-friendly alternative to petrol or diesel vehicles. The manufacturers of such vehicles have expressed difficulty in neutralising the duty paid on their inputs and components. I propose to remedy this by imposing a nominal duty of 4 per cent on such vehicles. I also propose to exempt some critical parts or sub-assemblies of such vehicles from basic customs duty and special additional duty subject to actual user condition. These parts would also enjoy a concessional CVD of 4 per cent.
159. The humble cycle rickshaw is now being acclaimed as an environment-friendly means of transport. CSIR has developed an innovative product called 'soleckshaw' to replace manually-operated rickshaws. It runs on batteries which are charged by solar power. I propose to provide a concessional excise duty of 4 per cent to this product. Its key parts and components are also being exempted from customs duty.
160. To encourage the use of bio-degradable materials, I propose to exempt the import of compostable polymer from basic customs duty.
Infrastructure
161. Strengthening the public transport system is another means of reducing dependence on fossil fuels. I propose to grant project import status to 'Monorail projects for urban transport' at a concessional basic duty of 5 per cent.
162. Full exemption from import duty is available to specified machinery for road construction projects on the condition that the machinery shall not be sold or disposed of for a minimum period of five years. In view of representations that this leads to idling of machinery, I propose to allow resale of such machinery on payment of import duty at depreciated value. It is also being clarified that the importer is free to relocate such machinery to other eligible road construction projects.
163. With the subscriber base growing at 14 million per month, India is one of the fastest growing markets for mobile phone connections in the world. Domestic production of mobile phones is now picking up in view of exemptions from basic, CVD and special additional duties granted to their parts, components and accessories. To encourage the domestic manufacture of accessories, these exemptions are now being extended to parts of battery chargers and hands-free headphones. Also, the validity of the exemption from special additional duty is being extended till March 31, 2011.
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