Chidambaram's sop opera.

NEW DELHI, May 7: Finance minister P Chidambaram has announced a host of tax concessions on items of common consumption and some industrial inputs resulting in a loss of revenue of Rs 111 crore.

Moving the Finance Bill in Lok Sabha on Thursday, Chidambaram relaxed the voluntary disclosure scheme, enhanced allocation for power sector, provided special incentive for telecom and excluded software exports from the ambit of MAT. The minister has put on hold levy of service tax pending finalisation of rules.

The items of common consumption which will attract lower duty rates are umbrellas, fruit juice based non-alcoholic beverages, synthetic sewing thread, roofing tiles, matches, switches and plugs, sanitary towels, napkins for babies and match-boxes. Industrial inputs like ferro nickel, CNC systems, carbon black and certain specified raw material will also become cheaper.

Chidambaram, who appeared worried about the sluggishness in industrial production, appealed to industry to raise funds from capital markets and borrow from banks and financial institutions to invest and help the country achieve an industrial growth rate of at least 12 per cent. At the same time, he vowed to strengthen tax compliance provisions and stressed "nobody who should be inside the tax net would remain out of it".

The changes proposed in the Finance Bill, Chidambaram said, would involve a net loss of Rs 55 crore on the customs side and Rs 56 crore on the excise side.

Chidambaram said that he would withdraw tax exemption on income by way of lease rent paid by aircraft operators to foreign enterprises provided the agreement was entered into on or after April 1, 1997. There would not be any grossing of income.

In a bid to encourage exports of software, the minister exempted such exports under section 80HHE from the ambit of MAT. He also promised to make certain amendments for providing a mechanism for carryforward of MAT.

On the levy of additional tax on distributed profits of domestic companies, Chidambaram said that section 32 of the UTI Act 1963 would be amended to omit sub-section (3).

The finance minister also promised to rectify anomalies on weighted deduction on expenditure of capital nature incurred by a company on in-house scientific research. He said that tax holiday to production of mineral oil in north-eastern states would be extended.

As far as indirect taxes were concerned, Chidambaram reduced customs duty on CNC systems from 30 per cent to 20 per cent on a demand from domestic manufacturers of machine tools.

As a measure of relief to the steel industry, the customs duty on ferro-nickel has been dropped further from 20 per cent to 10 per cent. The minister has fixed a uniform rate of duty of Rs 2,500 per tonne for all aluminium circles and proposed to introduce a scheme of compounded levy for producers. Manufacturers of colour picture tubes will benefit from a further reduction of customs duty on glass shells and parts and litharge from 20 per cent to 10 per cent.

He proposed to reduce basic customs duty on epichlorohydin from 30 per cent to 20 per cent, carbon-black feed stock from 30 per cent to 20 per cent and specified raw materials for the manufacture of medical syringes and needles to 10 per cent.

Excise duty on umbrellas and roofing tiles have been withdrawn. Duty on silicon has been reduced from 13 per cent to 8 per cent, fruit juice based non-alcoholic beverages from 18 per cent to 8 per cent, synthetic sewing thread from 18 per cent to 15 per cent, switches and plugs from 18 per cent to 13 per cent and sanitary towels, napkins for babies and similar sanitary articles from 13 per cent to 8 per cent.

The duty on matches produced in the mechanised sector has been reduced from Rs 3 to Rs 2.70 per hundred boxes of fifty matches. The excise duty on cruise ships, boats and cargo ships have been removed.

On the controversial service tax, the finance minister said it would not become applicable immediately after the Finance Bill became law.

Instead, an opportunity would be given to the industry to make representations about the manner in which the tax could be collected, and exemptions, if any, which deserve to be granted.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.