Budget 2001: Full Coverage

Changes in the indirect tax structure are estimated to result in an exciserevenue gain of Rs 4,677 crore but on the customs side there is an estimatedloss of Rs 2,128 crore. The modifications in the direct tax regime is alsoexpected to result in a revenue loss of Rs 5,500 crore which Mr Sinha hopesto more than make up with tax buoyancy and increased voluntary taxcompliance.

Direct tax collections for 01-02 are projected to grow to Rs 84,800 crorefrom Rs 74,467 crore estimated during the current fiscal while indirect taxreceipts have been projected at Rs 1,40,992 crore. Total tax revenuereceipts have been estimated at Rs 1,63,031 crore for the next fiscal Inorder to fulfil his promise of bringing down the custom duty level to EastAsian levels, Mr Sinha plans to reduce the peak rate to 20 per cent withinthree years.

The finance minister has also accepted the industry's demand on dividend taxbut partially. He has cut the tax payable by companies and mutual funds,including UTI, on distribution of dividend from 20 per cent to 10 percent.

As a whole, the industry has got a mixed bag. While the automobiles sectoris one of the major gainers with the excise duty coming down from 40 percent (Cenvat 16 per cent plus 24 per cent SED) to 32 per cent (Cenvat 16 percent plus SED 16 per cent) on passenger cars and from 24 per cent to 16 percent on two-wheelers, the cigarette industry is once again at the receivingend with the finance minister slapping a 15 per cent surcharge on cigarettesand bidis.

All items currently charged at half the rate of 16 per cent Cenvat have beennow put in the 16 per cent bracket. He has also made a beginning inwithdrawing individual exemptions by imposing a nominal duty of 4 per centon items like goggles, imitation jewellery and rubberised mattresses etc.

On the service tax front, as many as 14 new services have been added to thelist. These include specified banking and financial services, includingcredit cards, authorised service stations for servicing of vehicles,broadcasting services, convention services, on-line information and database retrieval service and services auxiliary to insurance.

Though Mr Sinha has left the four customs duty slabs of 35, 25, 15 and 5 percent untouched, he abolished the 10 per cent surcharge which will bring downthe peak duty level from 38.5 per cent to 35 per cent. The farm and someindustrial sectors such as liquor, automobiles and edible oil have also beenprotected against cheap imports by an increase in the custom duty. Duty ontea, coffee, copra and coconut have been raised from 35 per cent to 70 percent. Similarly, duty on crude edible oil and refined oils has been raisedto 75 per cent and 85 per cent. Customs duty on IT and telecom products andtheir inputs and components has been been reduced to 15 per cent.

The automobile industry has been protected by an increase in the basiccustom duty rate on second hand cars, multi-utility vehicles and two-wheelers to 105 per cent. The total duty applicable on used cars will bemore than 180 per cent.

A countervailing duty (CVD) at a suitable rate will be levied on importedliquor, taking into account the levies of the state excise on the domesticproduction, to provide a level playing field to domestic liquor companies.

The CVD on imported consumer products will henceforth be charged on thebasis of maximum retail price to provide a level playing field to thedomestic industry.

Mr Sinha has, to some extent, addressed a long pending demand of theindustry to cut the custom duty on raw materials in cases where it is higherthan the duty on finished products. Duty on DMT, PTA, MEG and caprolactum,raw materials for man-made fibres and yarns, has also been reduced from 25per cent to 20 per cent. Gems and jewellery sector has been granted sopswith reduction in the custom duty on cut and polished coloured gem stonesfrom 35 per cent to 15 per centand on rough diamonds to 5 per cent.

The finance minister hopes to soften the cement prices by lowering thecustom duty on cement and clinker to 25 from 35 per cent.