B U D G E T   2 0 0 1- 0 2

Service tax broad-based

New Delhi, February 28
The Union Budget for 2001-02 today proposed unified Cenvat of a single excise duty of 16 per cent, broad-based service tax and gave sops to income tax payees, removing all surcharges except the 2 per cent levy for Gujarat, while slapping a 15 per cent special excise surcharge on cigarettes and bidis.

Presenting his fourth Budget, Finance Minister Yashwant Sinha provided tax incentives for housing, rural development and special economic zones and reduced duty on gold imports.

While the changes in direct tax proposals will result in a loss of Rs 5,500 crore, the excise duty changes will fetch in an additional Rs 4677 crore.

Changes on the customs duty front would result in a revenue loss of Rs 2,128 crore. 

The special excise duty on aerated soft drinks, soft drink concentrates for vending machines and motor cars have been reduced to 16 per cent from the present 24 per cent while all items under 8 per cent excise duty category will now attract 16 per cent.

However, cotton yarn, sewing thread, LPG, kerosene and diesel up to 10 hp will continue to attract 8 per cent excise duty. Food preparations based on fruits and vegetables have been completely exempted from excise duty.

Enlarging the scope of service tax, Sinha proposed to bring in 14 more services, including specialised banking and financial activities, authorised vehicle service stations, port services, broadcasting, photographic, telex, telegraph, facsimile, online information and data-based retrieval, auxiliary insurance and video tape production into it. 

Achieving for the first time in recent years the targeted fiscal deficit of 5.1 per cent in the current year, Sinha pegged the fiscal deficit for the next financial year at an ambitious 4.7 per cent, in line with the proposal in the fiscal responsibility legislation.

The Budget has stepped up the outlay on defence by Rs 7539 crore, taking the non-Plan expenditure in the coming year to Rs 2,75,123 crore as against Rs 2,49,284 crore in the revised estimates for the current year.

Interest payments of Rs 11,633 crore and grants to state governments of Rs 2,221 crore were the other main ingredients that raised the non-Plan expenditure.

The Budget estimates a total expenditure of Rs 3,75,223 crore, of which Rs 1,00,100 crore is for Plan and Rs 2,75,123 crore for non-Plan. 

Sinha raised the basic customs duty on import of second-hand cars, multi-utility vehicles, scooters and motorcycles to 105 per cent to prevent flooding of goods from abroad with the dismantling of quantitative restrictions (QRs) from April 1 this year.

The total duty now applicable on these will be more than 180 per cent, he said, adding from April 1, second-hand cars would be freely importable.

The excise duty on high-speed diesel, which was reduced to 12 per cent in September, has now been restored to 16 per cent.  The special excise duty on motor spirit is also being restored to the previous level of 16 per cent.

The 8 per cent excise duty on LPG is being extended to CNG.

In the direct tax proposals, the Finance Minister extended the 10-year tax holiday for infrastructure projects to airports, ports, inland ports, industrial parks and distribution and generation of power.

The five-year tax holiday available to the telecommunication sector till March 31, 2000, is being re-introduced for units commencing operations before March 2003.  These concessions will also be available to Internet service providers and broadband networks.

Taking note of the popularity of TV game shows, the minister proposed to levy a lower tax rate of 30 per cent on winning of lotteries and cross-word puzzles, which will be deducted at source. PTI

Stock markets applaud

Mumbai, February 28
Markets, particularly the Bombay Stock Exchange (BSE), the pulse of the country’s economy, greeted the Finance Minister, Yashwant Sinha’s Budget proposals with a resounding applause, as both old and new economy share values posted a surge of buying enquiries.

The recently battered IT sector received a major boost, leading equities to notch sharp gains that lifted the sensex by a whopping 177 points at close on the BSE.

Although, market speculation of resolution of payment crisis helped share prices make a smart turnaround, the pragmatic Budget proposals went a long way to fuel the confidence of investors, a dealer said.

At the National Stock Exchange (NSE), share prices opened subdued, but later reacted equally on a positive note and ended the day with moderate gains.

The interbank foreign exchange (forex) market did not lag far behind, as a fresh round of dollar sales by foreign funds induced banks to liquidate long positions and helped the rupee post handsome gains against the US currency.

Rupee’s rally was attributed to the raising of equitreign capital in a company under the portfolio investment route and a reduction in administered interest rates on small savings. PTI

Highlights of Part ‘A’ of Union Budget 

NEW DELHI, Feb 28 (PTI) — The following are highlights of Part ‘A’ of the Union Budget for the year 2001-2002:

• Fiscal deficit contained at 5.1 per cent of the GDP in 2000-01; combined fiscal deficit of centre and state at 10 per cent.

• Centre targets mopping up Rs 12,000 crore through PSU disinvestment during 2001-02; privatisation to be accelerated.

• Budgetary support for central, state and union territories goes up by 16 per cent to Rs 13,862 crore.

• Total expenditure in the Budget estimated at Rs 375,223 crore in 2001-02.

• Gross budgetary support for Central Plan enhanced to Rs 59,456 crore from Rs 48,269 crore in the current fiscal year.

• Postal rates to be revised to contain deficit.

• Facility of LTC to Central Government employees to be suspended for two years.

• Administered interest rates to be reduced by 1 to 1.5 per cent points as of March 1, 2001.

• Interest rates on loans portion of Central assistance to state Plans being reduced by 50 basis points.

• Nabard to cut lending rates from 11.5 to 10.5 per cent.

• The 40 per cent limit of investment in a company under the portfolio investment route by FIIs being increased to 49 

• Companies issuing ADRs and GDRs to be allowed to make foreign investments up to 100 per cent of these proceeds; up from current ceiling of 50 per cent.

• Indian companies may now invest abroad up to 50 million dollars annually through the automatic route.

• Indian companies that had issued ADRs and GDRs may acquire shares of foreign companies up to an amount of 100 million dollars or an amount equivalent to 10 times of their exports in a year.

• Foreign investors bringing in a minimum of 50 million dollars FDI in non-banking financial companies need not be accompanied with a divestment of minimum of 25 per cent of their holdings in the domestic market.

• Banking service recruitment boards to be abolished by July 31, 2001. Banks to do all future recruitments themselves.

• RBI to set up an electronic negotiated dealing system by June 2001 to facilitate transparent electronic bidding in auctions and dealing in government security on a real-time basis.

• Public Debt Act to be replaced by Government Security Act.

• Government to set up seven more debt recovery tribunals during 2001-2002.

• As part of state fiscal reforms, Rs 4243 crore provided towards incentive fund to encourage states to implement monitorable fiscal reforms.

• Devolution of Central taxes to states is expected to go up by about Rs 9,000 crore in 2001-2002 over the current year.

• Non-plan expenditure of Centre is estimated to go up to Rs 2,75,123 crore in 2001-2002 as against Rs 2,49,285 crore in revised estimates for 2000-2001.

• Recommendations of the Expenditure Reforms Commission to be implemented by July 31, 2001 and identified surplus staff transferred to surplus pool.

• Centre sets up a high-level expert group to review the pension system; employees entering Central Government services after October 1, 2001, to receive pension through a new programme based on defined contributions.

• Rent (standard licence fee) on government accommodation being enhanced from April 1 this year.

• In the agricultural sector Centre proposes to remove inter-state movement of foodgrains; Essential Commodities Act, 1995 to be reviwed; the number of commodities declared as essential under the Act to be brought down.

• Financial assistance to state governments to enable them to procure and distribute foodgrains to BPL families at subsidised rates under PDS. 

• Kisan credit cards (KCC) to all eligible farmers within three years and the holders to get personal insurance package to cover them against accidental death or permanent disability on subsidised premia.

• Nabard to reduce interest rates for funding the storage of crops from 10 per cent to 8.5 per cent.

• Technology mission for integrated development of horticulture in the north-eastern states with a corpus of Rs 38 crore.

• Centre proposes Rs 750 crore for rural electrification to be completed within next six years.

• A time bound programme to installation of 100 per cent metering by december 2001.

• Energy audit at all levels.

• Allocation to the accelerated power development programme (APDP) stepped up to Rs 1,500 crore from Rs 1,000 in 2000-2001.

• Commercialisation of power distribution , SEBs restructuring.

• Prior government approval not required for effecting lay-off, retrenchment and closure by industrial establishments employing less than 1000 workers; separation compensation increased to 45 days from 15 days for every completed year of service.

• Government to announce policy ( Ashraya Bima Yojana) to provide compensation to workers who lose their jobs.

• Pradhan Mantri Gram Sadak Yojana with a fund of Rs 2,500 crore to provide connectivity of every village with a population of over 1,000 persons by 2003 and with a population of up to 500 persons by 2007.

• In the SSI sector 14 items related to leather goods, shoes and toys to be dereserved.

• The exemption limit has been doubled to Rs 1 crore September 1, 2000. 

• Plan allocation for Ministry of Health and Family Welfare goes up to Rs 5780 crore from Rs 4920 crore; Rs 180 crore provided for HIV/AIDS control programme.

• New comprehensive commercial bank scheme for educational loans to cover all courses in schools and colleges in India and abroad; up to Rs 7.5 lakh of loan for studies in India and Rs 15 lakh for abroad.

• All existing and on-going schemes on elementary education to converge into an integrated national education programme.

• Integrated schemes for women’s empowerment in 650 blocks through women’s self-help groups being launched.

• IRDA to look into social security issues of the unorganised sector and provide a road map for pension reforms by October 1, 2001.

• Allocation for welfare schemes for uplift of SC/ST enhanced.

• As first step towrads full decontrol of sugar futures/forward trading to be introduced; the retail price under PDS being revised to Rs 13.25 a kg from March 1, 2001.

• The allocation for textiles enhanced by more than 50 per cent to Rs 650 crore from Rs 457 crore this year.

• Journalists welfare fund being set up with a contribution of Rs 1 crore. 

• The deadline of March 2002 for dismantling of the APM in the petroleum sector to be adhered to. PTI