10 July, 2014

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Budget 2014-15 :- Hon'ble FM Speech on Indirect Taxes




Indirect Taxes
212.     I now turn to indirect taxes and shall begin with customs duties.
213.     Manufacturing sector is under stress due to a variety of reasons. To boost domestic manufacture as also to address the issue of inverted duties, I propose to reduce the basic customs duty (BCD) on:
·     Fatty acids, crude palm stearin, RBD and other palm stearin, specified industrial grade crude oils from 7.5 percent to Nil for manufacture of soaps and oleo-chemicals;
·     Crude glycerin from 12.5 percent to 7.5 percent and crude glycerin used in the manufacture of soaps from 12.5 percent to Nil;
·     Steel grade limestone and steel grade dolomite from 5 percent to 2.5 percent;
·     Battery waste and battery scrap from 10 percent to 5 percent;
·     Coal tar pitch from 10 percent to 5 percent;
·     Specified inputs for manufacture of spandex yarn from 5 percent to Nil.

214.     In order to encourage new investment and capacity addition in the chemicals and petrochemicals sector, I propose to reduce the basic customs duty on reformate from 10 percent to 2.5 percent; on ethane, propane, ethylene, propylene, butadiene and ortho-xylene from 5 percent to 2.5 percent; on methyl alcohol and denatured ethyl alcohol from 7.5 percent to 5 percent; and on crude naphthalene from 10 percent to 5 percent.
215.     The demand for electronics is growing very fast. To boost domestic production and reduce our dependence on imports, I intend to take the following steps:
·     Impose basic customs duty at 10 percent on specified telecommunication products that are outside the purview of the Information Technology Agreement;
·     Exempt all inputs/components used in the manufacture of personal computers from 4 percent special additional duty (SAD);
·     Impose education cess on imported electronic products to provide parity between domestically produced goods and imported goods;
·     Exempt 4 percent SAD on PVC sheet and ribbon used for the manufacture of smart cards.
216.     Cathode ray TVs are used by weaker sections who cannot afford to buy more expensive flat panel TVs. I propose to exempt colour picture tubes from basic customs duty to make cathode ray TVs cheaper. The duty concession will help revive manufacturing of TVs in the SME sector and create employment opportunities. At the same time, to encourage production of LCD and LED TVs below 19 inches in India, I propose to reduce the basic customs duty on LCD and LED TV panels of below 19 inches from 10 percent to Nil. Further, to encourage manufacture of LCD and LED TV panels, I propose to exempt from basic customs duty specified inputs used in their manufacture.
217.     The domestic stainless steel industry is presently suffering from severe under-utilization of capacity. To give an impetus to the stainless steel industry, I propose to increase the basic customs duty on imported flat-rolled products of stainless steel from 5 percent to 7.5 percent.
218.     We need to maximize our utilization of solar power. The existing duty structure incentivizes imports rather than domestic manufacture of solar photovoltaic cells and modules. Therefore, I propose to exempt from basic customs duty:
·     specified inputs for use in the manufacture of EVA sheets and back sheets;
·     flat copper wire for the manufacture of PV ribbons.
            A concessional basic customs duty of 5 percent is also being extended to machinery and equipment required for setting up of a project for solar energy production.
219.     To promote wind energy, I propose to reduce the basic customs duty from 10 percent to 5 percent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Also, I propose to exempt the SAD of 4 percent on parts and raw materials required for the manufacture of wind operated generators. Further, I propose to prescribe a concessional basic customs duty of 5 percent on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).
220.     I have only highlighted some of the proposals in the Budget 2014-15. I am sure these measures would incentivize value addition, generate income and create more jobs in India.
221.     I have also undertaken several tax rationalization measures. At present, coal attracts customs duties at different rates. I propose to rationalize the duty structure on all non-agglomerated coal at 2.5 percent basic customs duty and 2 percent CVD. Henceforth, anthracite coal, bituminous coal, coking coal, steam coal and other coal will attract the same duty. This will eliminate all assessment disputes and transaction costs associated with testing of various parameters of coal.
222.     Metallurgical coke is manufactured out of coking coal. The basic customs duty on metallurgical coke is being increased from Nil to 2.5 percent in line with the duty on coking coal.
223.     Ships imported for breaking up attract basic customs duty at 5 percent. As against this, melting scrap of iron or steel attracts basic customs duty at 2.5 percent. I propose to rationalize the duty on ship breaking scrap and melting scrap of iron or steel by reducing the basic customs duty on ships imported for breaking up from 5 percent to 2.5 percent.
224.     Semi-processed, half cut or broken diamonds are presently exempt from basic customs duty. As against this, cut and polished diamonds and coloured gemstones attract basic customs duty of 2 percent.  To prevent mis-use and avoid assessment disputes, the basic customs duty on semi-processed, half cut or broken diamonds, cut and polished diamonds and coloured gemstones is being rationalized at 2.5 percent. To encourage exports, pre-forms of precious and semi-precious stones are being fully exempted from basic customs duty.
225.     To encourage exports of readymade garments I propose to increase the duty free entitlement for import of trimmings, embellishments and other specified items from 3 percent to 5 percent of the value of their exports.
226.     Considering the need to conserve our natural resources, I propose to increase the export duty on bauxite from 10 percent to 20 percent.
227.     The free baggage allowance under the baggage rules was last revised in 2012. As a measure of passenger facilitation, I propose to increase the free baggage allowance from `35,000 to ` 45,000.
228.     I shall now deal with excise duties.
229.     To provide a fillip to the capital goods, consumer durables and automobile sectors, and given our commitment to revive economic growth, I have already extended the excise duty concessions beyond 30th June 2014 for a period of 6 months up to 31st December 2014. We expect the industry to show positive results in the coming months.
230.     In continuation, I have a few more proposals to boost domestic production. Minimization of harvest and post harvest losses of agricultural produce is an important measure for tackling food inflation and ensuring food security. The losses in fruits and vegetables are mainly due to lack of adequate processing capacity. To incentivize expansion of processing capacity, I propose to reduce the excise duty on specified food processing and packaging machinery from 10 percent to 6 percent.
231.     As a measure of relief to the footwear industry, most of which are in SME sector, I propose to reduce the excise duty from 12 percent to 6 percent on footwear of retail price exceeding ` 500 per pair but not exceeding ` 1,000 per pair. Footwear of retail price up to ` 500 per pair will continue to remain exempted.
232.     I propose to withdraw the concessional excise duty (2 percent without Cenvat benefit and 6 percent with Cenvat benefit) on smart cards and levy a uniform excise duty at 12 percent. Consequently, imports will attract higher CVD. This will help domestic industry.
233.     To develop renewable sources of energy, I propose to exempt from excise duty:
·     EVA sheets and solar back sheets and specified inputs used in their manufacture;
·     solar tempered glass used in the manufacture of solar photovoltaic cells and modules;
·     flat copper wire for the manufacture of PV ribbons for use in solar cells and modules;
·     machinery and equipment required for setting up of a project for solar energy production;
·     forged steel rings used in the manufacture of bearings of wind operated generators;
·     machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).
234.     To set at rest an on-going dispute, I propose to exempt PSF and PFY manufactured from plastic waste and scrap including PET bottles from excise duty with effect from 29th June, 2010 to 7th May, 2012. I also propose to levy prospectively a nominal duty of 2 percent without Cenvat benefit and 6 percent with Cenvat benefit on such PSF and PFY.
235.     To encourage sports, I propose to prescribe a concessional excise duty of 2 percent without Cenvat benefit and 6 percent with Cenvat benefit on sports gloves.
236.     While undertaking all these measures, I also need to mobilize resources. Accordingly, I propose to increase the specific excise duty on cigarettes in the range of 11 percent to 72 percent. Similar increases are proposed on cigars, cheroots and cigarillos. Likewise, the excise duty is being increased from 12 percent to 16 percent on pan masala, from 50 percent to 55 percent on unmanufactured tobacco and from 60 percent to 70 percent on gutkha and chewing tobacco. I also propose to levy an additional duty of excise at 5 percent on aerated waters containing added sugar. These are healthy measures and I hope everyone would welcome them from the point of view of human and fiscal health.
237.     Clean Energy Cess is presently levied on coal, peat and lignite for the purposes of financing and promoting clean energy initiatives and funding research in the area of clean energy. I propose to expand the scope of purposes of levying the said cess to include financing and promoting clean environment initiatives and funding research in the area of clean environment. To finance these additional initiatives, I propose to increase the Clean Energy Cess from ` 50 per tonne to `100 per tonne.
238.     I shall now deal with service tax.
239.     In recent times, among indirect taxes, service tax has shown the highest rate of growth. Since my overall objective is to prepare the indirect tax regime for a smooth transition to Goods and Services Tax, changes have been kept minimal at this stage. The twin objectives in this sector of indirect taxes are to widen the tax base and enhance compliance. My proposals in relation to Service Tax are in line with these objectives.
240.     To broaden the tax base in Service Tax, it is necessary to prune the negative list and exemptions to the extent possible. Accordingly, the negative list has been reviewed and service tax leviable currently, on sale of space or time for advertisements in broadcast media, is being extended to cover such sales on other segments like online and mobile advertising. Sale of space for advertisements in print media however would remain excluded from service tax. Similarly, tax is being proposed on the service provided by radio-taxis to place them on par with rent-a-cab service. These new levies will come into effect from a date to be notified after the passing of the Finance Bill.
241.     In furtherance of the effort to broaden the tax base, certain exemptions are being withdrawn, including those extended to services by air-conditioned contract carriages and technical testing of newly developed drugs on human participants.
242.     To spur growth in certain sectors, I have tried to correct the bottlenecks which have been brought to my knowledge. Indian shipping industry had been representing that they are losing business in a tough global scenario, due to a provision in the Place of Provision of Services Rules, which is now being addressed through an amendment. Similarly, to encourage growth in the transport of goods through coastal vessels, the tax incidence is being reduced. In response to the request of the tourism sector,  services provided by Indian tour operators to foreign tourists in relation to a tour wholly conducted outside India is being taken out of the tax net. A long standing demand of this sector has been to allow Cenvat credit for services of rent-a-cab and tour operators. I now propose to allow credit in the same line of business.
243.     I had to accept a few requests for exemptions from the social sector, since exemption-induced distortion would be comparatively less in such sectors. At the request of the Ministry of Agriculture, service tax on loading, unloading, storage, warehousing and transportation of cotton, whether ginned or baled, is being exempted to bring it on par with certain other agricultural produce. Services provided by the Employees’ State Insurance Corporation for the period prior to 1st July 2012 is being exempted.
244.     For the benefit of the common man, the exemption presently available for specified micro insurance schemes is being expanded to cover all life micro-insurance schemes where the sum assured does not exceed ` 50,000 per life insured. Since taxes should not come in the way of safe disposal of medical and clinical wastes, services provided by common bio-medical waste treatment facilities are being exempted.
245.     Certain changes are also proposed for bringing about greater clarity and for reducing litigation regarding the scope of exemptions. These include functions ordinarily entrusted to a municipality and services in relation to education. 
246.     There are a few more decisions which entail small gains or losses of revenue. Certain amendments are also being proposed in the Customs and Central Excise Acts and in the Finance Act, 1994 relating to service tax. These changes are reflected in the budget documents.
247.     My tax proposals on the indirect taxes side are estimated to yield ` 7,525 crore.
248.     I have some more proposals which are in the nature of facilitating trade and resolving disputes. I shall highlight only a few.
249.     Faster clearance of import and export cargo reduces transaction costs and improves business competitiveness. To help achieve these objectives, measures are being initiated to extend the existing 24x7 customs clearance facility to 13 more airports in respect of all export goods and to 14 more sea ports in respect of specified import and export goods.
250.     It is also proposed to implement an ‘Indian Customs Single Window Project’ to facilitate trade. Under this, importers and exporters would lodge their clearance documents at a single point only. Required permissions, if any, from other regulatory agencies would be obtained online without the trader having to approach these agencies. This would reduce interface with Governmental agencies, dwell time and the cost of doing business.
251.     The scheme of Advance Ruling in indirect taxes is being expanded to cover resident private limited companies. This will allow these companies to seek advance ruling in respect of new activities being proposed to be undertaken by them. The scope of Settlement Commission is being enlarged to facilitate quick dispute resolution.
252.        To expedite the process of disposal of appeals, amendments have been proposed in the Customs and Central Excise Acts with a view to freeing appellate authorities from hearing stay applications and to take up regular appeals for final disposal.






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