|Thursday, March 1, 2001,
IT surcharge goes, cut in PF interest rate
New Delhi, February 28
Continuing with further rationalisation of the indirect tax structure, Mr Sinha reduced the three rates of special excise duty from the existing 8 per cent, 16 per cent and 24 per cent to a single 16 per cent, slapped additional duty on items that are threatened by free imports and reduced customs duty on a number of items to keep up with the commitments of the WTO.
His proposals on the excise side are estimated to result in a revenue gain of Rs 4677 crore in a year while the proposals on the customs side would result in a revenue loss of Rs 2128 crore.
The bitter pill in the announcements was that the administered interest rates of the Provident Fund and small savings scheme would be reduced by 1 to 1.5 per cent from March 1, 2001. An Expert Committee will be appointed to provide recommendations on this issue.
Lacing his speech with occasional humour, a smiling Mr Sinha made an attempt to revive the feel good factor in the economy and focused attention on giving a thrust to growth through stringent control of non-productive expenditure, rationalisation of subsidies, intensification of infrastructure investment and acceleration of the privatisation process.
Taking pride in his efforts to contain the fiscal deficit at the targeted 5.1 per cent of GDP, Mr Sinha estimated total tax revenue receipts at Rs 163031 crore and the fiscal deficit at Rs 116314 crore or 4.7 per cent of GDP for the next financial year.
To improve tax collection, the minister announced that the value of perquisites, benefits or amenities of an employee would be determined on the basis of their cost to the employer, except in respect of houses and cars.
Salaried persons in the lower income range having income up to Rs 1 lakh would get an enhanced tax rebate at the rate of 30 per cent in respect of their eligible investments under Section 88 of the IT Act as against 20 per cent at present.
Among the other tax proposals, the minister announced a 10-year tax holiday for core sectors of infrastructure. Winnings from lotteries, crossword puzzles and television game shows would be taxed at a lower rate of 30 per cent.
The limit on income interest on time deposits for tax deduction at source is being decreased from the existing Rs 10,000 to Rs 2500. This would prevent people from splitting their fixed deposits.
Under the rationalisation of special excise duty, aerated soft drinks, soft drinks concentrates supplied to vending machines and cars will be reduced to 16 per cent instead of 24 per cent.
Food preparations based on fruits and vegetables will be completely exempt from excise duty. This will include common use items like pickles, sauces, ketchup and juices.
For the replenishment of the National Calamity Contingency Fund, the Finance Minister has proposed to levy a surcharge of 15 per cent on cigarettes. The duty on biris is being raised to Rs 7 per thousand from Rs 6. The total duty on pan masala would now be 55 and 60 per cent. Miscellaneous tobacco products like chewing tobacco will attract a total duty of 60 per cent.
In a bid to widen the tax base, Mr Sinha proposed to expand the scheme of one by six to all urban areas in the country and expanded the net of service tax to include an additional 14 services. This includes specified banking and financial services, telegraph services, facsimile services and services auxiliary to insurance.
He also prescribed a hike in postal tariffs. Under the proposal a 25 paise post card would cost 50 paise, a competition post card would cost Rs 5 and letters by weight would cost an additional one rupee.
There is no further reduction in the number of major customs duty rate which would remain 35 per cent, 25 per cent, 15 per cent and 5 per cent. However, the 10 per cent surcharge is being discontinued to bring the peak level from 38.5 to 35 per cent.
The customs duty on IT and telecom products and their inputs and components has been reduced to 15 per cent from March 1, 2001. The rate of basic customs duty on the import of second hand cars, multi-utility vehicles, scooters and motor cycles is being raised to 105 per cent, which is three times the peak rate. The total duty now applicable on these will be more than around 180 per cent.
In order to discourage gold smuggling, the duty on gold has been reduced to Rs 250 per 10 gm from Rs 400.
Describing the proposals as a “Budget for growth”, the Finance Minister also announced a number of measures that would be friendly to the tax payer. The time limits for issue of refunds, reassessment and reopening of assessments by the Income-Tax Department are proposed to be reduced and the department would no longer have the power to withhold the refund due to an assessee.
The Finance Minister, realising that agriculture was pulling down growth rate in recent years, announced several steps to boost the sector. This includes reduction in interest rate charged by NABARD from 11 per cent to 10.5 per cent, increase in the corpus of the Rural Infrastructure Development Fund by Rs 500 crore to Rs 5000 crore, and extension of Kisan Credit Cards.
He said urea would be decontrolled by April 1, 2006 and future trading in sugar would be allowed.
Addressing criticism that the economic reforms had not touched the man in the villages, Mr Sinha spoke about giving a thrust to rural connectivity by roads, electricity and education infrastructure.
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