Presenting the budget in the Lok Sabha today, focusing on the need to give relief to the stressed infrastructure, manufacturing and other sectors, the budget proposed reduction from 20 percent to 5 percent for three years on the rate of withholding tax on interest payments on external borrowings. The sectors covered include power, airlines, roads and bridges, ports and shipyards, affordable housing, fertilizers and dams. Corporates are proposed to get access to low cost funds to promote higher investments.
The restrictions on Venture Capital funds to go. Investment linked deduction of capital expenditure increased to 150 percent from 100 percent to businesses covering cold chain facility, warehouses, hospitals, fertilizers and affordable housing. New sectors including bee keeping and production of honey, container freight station will also be included for this concession. Research and development to get incentives with weighted deduction of 200 percent.
To boost power sector, the sunset date of 100 percent deduction allowed for 10 years has been extended to another year. Small and Medium Scale Enterprises having a turnover of one crore rupees will not come under compulsory tax audit. The Earlier limit was 60 lakh rupees.
To generate jobs and remove the shortage of skilled manpower, the manufacturing sector will get weighted deduction at the rate of 150 percent of expenditure incurred on skill development. Security transaction tax reduced by 20 percent on cash deliveries to help the capital markets. Alternate minimum tax extended to all persons other than companies to moderate outgo of profit linked deduction.
To boost agricultural processing industry, the customs duty is reduced from 7.5 percent to 2.5 percent on sugarcane planter, rotary tiller and weeder. It is also reduced from 7.5 percent to 5 percent on specified coffee plantation and processing machinery.
Water soluble fertilizers other than urea will attract 5 percent customs duty in stead of 7.5 percent and liquid fertilizers will attract to 2.5 percent duty instead of 5 percent.
To help thermal power industries facing high coal prices, the budget proposes full exemption of basic customs duty and concessional countervailing duty of one percent to steam coal for two years. Full exemption is also provided to fuels for power generation in the cases of plants using natural gas, liquefied natural gas, uranium concentrate and other such fuels. Basic customs duty on machinery and instruments used for surveying in mining areas, reduced to 2.5 per cent and full exemption from basic customs duty to be provided to coal mining projects.
To improve safety and better service of railways, customs duty on equipment reduced to 7.5 per cent from 10. Full exemption from import duty given to specified equipment imported for road construction by contractors of government projects extended to those awarded by Metropolitian authorities as well. Import of tunnel boring machine will be duty free without end use condition.
To help the ailing airline sector, basic customs duty on parts of aircraft and testing equipment to be fully exempted from customs duty. A proposal to foreign airlines to participate upto 49 per cent in the equity of Indian firms is under consideration. To boost manufacturing, basic customs duty on plant and machinery for expansion of iron ore pellet plants to be reduced to 2.5 per cent from 7.5 per cent.
In the steel sector, the duty on coating material for electrical steel to be reduced from 7.5 per cent to 5 per cent.
In the textile sector the budget proposes to exempt automatic shuttle-less looms from basic customs duty of 5 per cent.
Full exemption is also being given to automatic silk reeling and processing machinery. The basic customs duty on wool waste and wool tops to come down from 15 per cent to 5 per cent. Excise duty on branded ready made garments to go up from 10 to 12 per cent.
Full exemption from customs duty is proposed to be given to LCD, LED TV panels, parts of memory card for mobile phones, waster paper. Raw material used for manufacturing adult diapers to come down to 5 per cent.
The customs duty on bicycles to go up to 30 per cent from 10 per cent and bicycle parts from 10 per cent to 20 per cent to help the labour intensive industry. Excise duty on matches manufactured by semi-mechanized units to come down from 10 per cent to 6 per cent.
200 crore rupees have been set aside for research and scientific break through in achieving food security and agriculture development.
To promote clean environment, the budget proposes full exemption from countervailing duty for setting up solar thermal projects, Energy saving bulbs, compact fluorescent lamps to get full exemption from customs duty. Excise duty on LED to be slashed to 6 per cent, so also hybrid vehicles.
For containing the current accounts deficit the budget proposes to increase basic customs duty on standard gold bars from 2 per cent to 4 per cent and the non-standard gold from 5 to 10 per cent to check consumption. Cut and polished coloured gem stoned will attract 2 per cent duty. Branded silver jewellery to be fully exempted from excise duty and the duty on jewellery rationalized. The duty on package cements is also rationalized.
For additional resource mobilization, the basic excise duty on cigarettes for more than 65 mm length to be increased and also there will be nominal increase in the excise duty on hand rolled bidis from 8 rupees to 10 rupees per thousand and 19 rupees to 21 rupees per thousand for machine rolled bidis.
Pan masala, Gutka and other tobacco products will also attract higher duties. The cess on crude petroleum oil to go up to 4500 rupees per metric tonne an increase of 2000 rupees.
Completely built units of large cars and utility vehicles having engine capacity above the threshold with value of over 40 thousand US dollars will attract higher customs duty of 75 per cent instead of 60.
Full exemption from 5 per cent countervailing duty proposed for ships and vessels. Baggage allowance for Indians traveling abroad raised to 35, 000 rupees from 25, 000 and for children it will be 15,000 rupees instead of 12,000. The basic customs duty is estimated to result at a net revenue gain of 27,280 crore rupees and there will be an outgo of 4,500 crore rupees in the direct taxes due to concessions proposed in the budget.
Emphasizing the need to take hard decisions, Mukherjee said that his endeavour will be to restrict the subsidies to under 2 per cent of GDP in 2012-13. He however said the government will fully meet the subsidies for food security. The recommendations of the task force for direct transfer subsidies is being implemented in subsequent phases which will benefit 12 crore farmers families.
To promote housing for low income groups in major cities and towns the budget proposes to allow external commercial borrowing besides increasing Rural Housing fund to 4000 crore rupees from 3000 crores.
The interest subvention of one per cent of housing loan upto 15 lakhs to continue. India opportunities venture fund will be set up for availability of equity for micro small and medium enterprises. External commercial borrowing will also be allowed for infrastructure sectors like power and coal. Tax free bonds for infrastructure projects will be doubled to 60 thousand crore rupees. A new scheme – Rajiv Gandhi Equity Savings Scheme allowing income tax reduction of 50 per cent will be introduced to help new retail investors.
Allocation for social sectors have been increased across the board.
Mukherjee said it was the earnest desire of the government to give effect to Direct Tax Code from April 2012. However, the report of the Parliamentary Standing Committee was received only on the 9th of this month. He said the government will examine the report speedily an d take steps for enactment of Direct Tax Code soon.
Similarly he said the government is awaiting the recommendations of the Parliamentary Standing committee which is going through the goods and Services Taxes, GST. He said that disinvestment is proposed to be pegged at 30 thousand crore rupees for the coming year. Mukherjee also proposed to table a White Paper on black money in the current session of parliament.
To deepen reforms in capital market the budget proposes to allow Qualified Foreign Investors access Indian Corporate Bond market. Initial Public Offers, IPOs, process will be simplified and it will be mandatory for companies to issue IPOs of ten crore rupees and above in electronic form through nationwide broker network of stock exchanges.
Habitations with the population of more than one thousand in the North Eastern and hilly states will be covered under “Swabhimaan” for providing banking facilities.
Considering the year 2012 marking the beginning of Indian Cinema Centenary year, the budget proposed to exempt the Industry from service tax on copyrights for recording of cinematographic films.
The budget proposes to peg the fiscal deficit to 5.1 per cent of the GDP against the current fiscal's of 5.9 per cent. It shows a revenue deficit of one lakh 85 thousand 752 crore rupees, representing 1.8 per cent of GDP.
The Finance Minister also presented the Finance Bill after presenting the budget.
