GOVT. BOOSTER PACKAGE
Ad valorem rates of excise duty cut to 10%, 8% and 4% from today; No change in rates for petro products.
REPOSING its belief in fiscal measures to boost demand so that the slowing-down economy could stop its movement in the reverse gear, the UPA Govt today came out with virtually a mini-budget by effecting a 4% cut in ad valorem rates of excise duty besides reduction in Customs as well as service tax.
The highlights are as follows:
Central Excise
The three major ad valorem rates of Central Excise duty viz. 14%, 12% and 8% applicable to non-petroleum products have been reduced by 4 percentage points each. The revised rates will be 10%, 8% and 4% respectively.
Cars, other than small cars, attract composite rates – that are a combination of specific and ad valorem rates. The rates applicable hitherto were '24% + Rs.15,000/-` per unit for cars of engine capacity 1500 cc to 1999 cc and '24% + Rs.20,000/-` per unit for cars of engine capacity of 2000 cc or more. The ad valorem component of these rates has been reduced from 24% to 20%.
In the case of cement, which attracts either the ad valorem rate of 12% or specific rates (Rs./metric tonne) depending upon the retail sale price, the specific rates have also been reduced in the same proportion as the ad valorem rate. Further, the concessional rates for cement produced by mini-cement plants have also been reduced proportionately. Bulk cement would now be chargeable to either 10% ad valorem or Rs.280/- per tonne, whichever is higher. The rate of duty on cotton textiles and textile articles has been reduced from 4% to Nil.
No change has been made in the excise duty rates on petroleum products, specific rated items and tobacco products.
Notification No.58/2008-Central Excise and Notification No.59/2008-Central Excise, both dated 07.12.2008 have been issued in this regard.
Customs duty
To provide relief to the power sector, naphtha imported for generation of electric energy has been fully exempted from basic customs duty. This exemption will be available upto 31.03.2009.
Notification No.128/2008-Customs dated 07.12.2008 has been issued in this regard
Export duty on iron ores
The export duty of 8% on iron ore fines has been withdrawn while the rate of export duty on iron ore lumps has been reduced from 15% to 5% ad valorem.
Notification No.129/2008-Customs, and Notification No.130/2008-Customs both dated 07.12.2008 were issued in this regard here today.
Service Tax
Notification No.41/2007-Service Tax provides for refund of service tax paid by exporters on 18 taxable services attributable to export of goods. The benefit of such refund has now been extended to services provided by a clearing and forwarding agent to exporters also. In addition, the threshold limit of refund of service tax paid by exporters on foreign commission agent services has been enhanced from 2% of FOB value to 10% of FOB value of export goods. Further, drawback benefit can now be availed of simultaneously with refund of service tax paid in respect of exports. Notification No.33/2008-Service Tax, dated 07.12.2008, amending the aforesaid notification No.41/2007-Service Tax was issued in this regard here today.
All the aforesaid changes are effective from today.
Safety of Bank Deposits and Stability of Financial System - Assured. A pre-election mini budget? Government to spend Rs 3 lakh crores in the next four months
GOVERNMENT'S first priority in this fiscal package is to reassure the people of the stability of the financial system in general and of the safety of Bank deposits in particular. Government has taken steps to infuse liquidity into the banking system. Once the stability of the system is assured, the focus is on countering the impact of Global recession on India's Economic Growth.
A large number of measures have been announced to stimulate growth. There was a budget in February 2008 with a proposed fiscal deficit of Rs.1,133,287 crores. The budget had not provided for the loan waiver and after that nothing has gone right for the Budget. The Sixth Pay Commission, crude hike, global recession and now the new stimulus package have all added to the woes of those managing the Budget. Now nobody knows what the fiscal deficit is likely to be. The Deputy Chairman of the Planning Commission Montek Singh Ahluwalia has just stated the obvious that the fiscal deficit will certainly be more than what was planned in the Budget. The Cabinet Secretary KM Chandrasekhar who was former Revenue Secretary has clarified that they were not looking at numbers but at immediate relief. So, as of now, the Government doesn't know how much revenue it is going to lose and what exactly is going to be the fiscal deficit.
Meaning of Fiscal stimulus: if you don't know what the meaning of stimulus is Mr. Montek Singh Ahluwalia has clarified that it is giving more than what is planed.
Government wants to seek authorisation for an additional plan expenditure of Rs.20,000 crores and a total spending of Rs.3 lakhs crores!
Governments going for an election in the first half of the year normally do not have the opportunity of announcing grand sops to woo the voters. With 3 lakh crores to spend in the next four months, good times are ahead for all concerned. Prominently figuring in this grand package to stimulate the economy is the gift to the Government Officers to replace their old vehicles.
Excise Duty rate falls below Service Tax?
IT has happened. Now the excise duty rate will be 10% and Service Tax remains at 12%. Maybe at whatever rate, we can't avoid the services, but costly goods can be avoided. Is this the theory? The new Finance Minister (no, a new FM is not yet nominated – we are referring to the PM FM) is an expert in Fiscal matters and is surrounded by top quality financial wizards and the only politician in the team is out of the team on special duty to contain terrorism.
They must be knowing what they are doing. A 4% cut in excise will perhaps boost production, sales and shares! Immediately it is not known whether the reduction is 4% from the tariff rate of 16% or the effective rate of 14%. In the former case, the new effective rate will be 12%, same as service tax and in the latter case, it will be 10% - that is less than Service tax. We will have to wait for the notifications, which we will bring you as soon as they are made available
With the apparent conflict between the Commerce Minister and the Finance Minister gone, the Commerce Ministry seems to have extracted quite a bit from Finance. The confusion regarding credit/refund of Service Tax paid on output services seems to have been resolved, at least for exporters – now they will get refund! Let us hope the Finance Ministry has not devised a complicated refund procedure to ensure that nobody gets refund.
Naphtha used in power sector will get import duty exemption which will hopefully provide the much needed relief to the power sector and ultimately empower (WHOM?)
Iron Ore fines can now be exported without export duty and lumps at a reduced 5% duty.
All those babus suffering with rickety old vehicles can go for sw*nky new cars thereby giving a relief to the Auto companies as well as comfort to the babus.
CAclubindia
