Budget-2010-Indirect Tax Proposals

Indirect Taxes

Custom & Excise.

  • The standard rate on all non-petroleum products enhanced from 8 per cent to 10 per cent ad valorem.
  • The specific rates of duty applicable to portland cement and cement clinker also adjusted upwards proportionately. Similarly, the ad valorem component of excise duty on large cars, multi-utility vehicles and sports-utility vehicles increased by 2 percentage points to 22 per cent.
  • Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each.
  • Some structural changes in the excise duty on cigarettes, cigars and cigarillos to be made coupled with some increase in rates. Excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc to be enhanced. Compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines to be introduced.

Agriculture & Related Sectors

  • Provide project import status with a concessional import duty of 5 per cent for the setting up of mechanised handling systems and pallet racking systems in ‘mandis’ or warehouses for food grains and sugar as well as full exemption from service tax for the installation and commissioning of such equipment.
  • Provide project import status at a concessional customs duty of 5 per cent with full exemption from service tax to the initial setting up and expansion of Cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce ; and Processing units for such produce.
  • Provide full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks.
  • Provide concessional customs duty of 5 per cent to specified agricultural machinery not manufactured in India;
  • Provide central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce; and

• Provide full exemption from excise duty to trailers and semi-trailers used in agriculture.

  • Concessional import duty to specified machinery for use in the plantation sector to be, extended up to March 31, 2011 along with a CVD exemption.
  • To exempt the testing and certification of agricultural seeds from service tax.
  • The transportation by road of cereals, and pulses to be exempted from service tax. Transportation by rail to remain exempt.
  • To ease the cash flow position for small-scale manufacturers, they would be permitted to take full credit of Central Excise duty paid on capital goods in a single installment in the year of their receipt. Secondly, they would be permitted to pay Central Excise duty on a quarterly, rather than monthly, basis.

Environment

  • To build the corpus of the National Clean Energy Fund, clean energy cess on coal produced in India at a nominal rate of Rs.50 per tonne to be levied. This cess will also apply on imported coal.
  • Provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units and also exempt them from Central Excise duty. Ground source heat pumps used to tap geo-thermal energy to be exempted from basic customs duty and special additional duty.
  • Exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty.
  • Central Excise duty on LED lights reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps.
  • To remedy the difficulty faced by manufacturers of electric cars and vehicles in neutralising the duty paid on their inputs and components, a nominal duty of 4 per cent on such vehicles imposed. Some critical parts or sub-assemblies of such vehicles exempted from basic customs duty and special additional duty subject to actual user condition. These parts would also enjoy a concessional CVD of 4 %.
  • A concessional excise duty of 4 per cent provided to “soleckshaw”, a product developed by CSIR to replace manually-operated rickshaws. Its key parts and components to be exempted from customs duty.
  • Import of compostable polymer exempted from basic customs duty.

Infrastructure

  • Project import status to ‘Monorail projects for urban transport’ at a concessional basic duty of 5 per cent granted.
  • To allow resale of specified machinery for road construction projects on payment of import duty at depreciated value.
  • To encourage the domestic manufacture of mobile phones accessories, exemptions from basic, CVD and special additional duties are now being extended to parts of battery chargers and hands-free headphones. The validity of the exemption from special additional duty is being extended till March 31, 2011.

Medical Sector

  • Uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty prescribed on all medical equipments. A concessional basic duty of 5 per cent is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty.
  • Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. retained. The concession available to Government hospitals or hospitals set up under a statute also retained.
  • Specified inputs for the manufacture of orthopaedic implants exempted from import duty.

Infotainment

• To address the difficulties experienced by film industry in importing digital masters of films for duplication or distribution loaded on electronic medium vis-à-vis those imported on cinematographic film, owing to a differential customs duty structure, customs duty to be charged only on the value of the carrier medium. The same dispensation would apply to music and gaming software imported for duplication. In all such cases the value representing the transfer of intellectual property rights would be subjected to service tax.

  • Provide project import status at a concessional customs duty of 5 per cent with full exemption from special additional duty to the initial setting up “Digital Head End” equipment by multi-service operators.

Precious Metals

  • Rates on precious metals indexed as follows:

: On gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams

: On silver from Rs.1,000 per kg to Rs.1,500 per kg.

  • Basic customs on Rhodium – a precious metal used for polishing jewellery reduced to 2 per cent.
  • Basic customs duty on gold ore and concentrates reduced from 2 per cent ad valorem to a specific duty of Rs.140 per 10 grams of gold content with full exemption from special additional duty. Further, the excise duty on refined gold made from such ore or concentrate reduced from 8 per cent to a specific duty of Rs.280 per 10 grams.

Other Proposals

  • Full exemption from import duty available to specified inputs or raw materials required for the manufacture of sports goods expanded to cover a few more items.
  • Basic customs duty on one of key components in production of micro-wave ovens, namely magnetrons, reduced from 10 per cent to 5 per cent.
  • Value limit of Rs. 1 lakh per annum on duty-free import of commercial samples as personal baggage enhanced to Rs. 3 lakh per annum.
  • Complete exemption from special additional duty provided to goods imported in a pre-packaged form for retail sale. This would also cover mobile phones, watches and ready-made garments even when they are not imported in pre-packaged form. The refund-based exemption is also being retained for cases not covered by the new dispensation.
  • Toy balloons fully exempted from Central Excise duty.
  • Reduction in basic customs duty on long pepper from 70 per cent to 30 per cent;
  • Reduction in basic customs duty on asafoetida from 30 per cent to 20 per cent;
  • Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4 per cent;
  • Reduction in central excise duty on corrugated boxes and cartons from 8 per cent to 4 per cent;
  • Reduction in central excise duty on latex rubber thread from 8 per cent to 4 percent; and
  • Reduction in excise duty on goods covered under the Medicinal and Toilet Preparations Act from 16 per cent to 10 per cent.
  • Proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs. 43,500 crore for the year.

Service Tax

  • Rate of tax on services retained at 10 per cent to pave the way forward for GST.
  • Certain services, hitherto untaxed, to be brought within the purview of the servicetax levy. These to be notified separately.
  • Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the definition of export of services and procedures.
  • Accredited news agencies which provide news feed online that meet certain criteria, exempted from service tax.
  • Proposals relating to service tax are estimated to result in a net revenue gain of Rs 3,000 crore for the year.
  • Proposals on direct taxes estimated to result in a revenue loss of Rs. 26,000 crore for the year.
  • Proposals relating to Indirect Taxes estimated to result in a net revenue gain of Rs.46,500 crore for the year. Taking into account the concessions being given in the tax proposals and measures taken to mobilise additional resources, the net revenue gain is estimated to be Rs. 20,500 crore for the year.