NEWSLINKS
BUDGET 2000 LIVE!
BUDGET ON REDIFF
D&B BUDGET SPL
ECONOMIC SURVEY
RLY BUDGET
BUDGET: RUN-UP
BUDGET PROCESS
BUDGET HOTLINKS
Y2K BIZ FEATURES
INDIA & THE WTO
GOVT&ECONOMY
SPECIALS
INTERVIEWS
COMMENTARY
CREDIT POLICY
BUDGET 1999-2000
USEFUL INFO
ARCHIVES
SEARCH REDIFF

Finance Minister Yashwant Sinha's Budget Speech

BUDGET 2000

Part 5

Sir, now I turn to the textile industry

I had introduced a compounded levy scheme for independent textile processors in December 1998. This has not worked as well as expected and has led to leakages and revenue losses; still, I do not wish to disturb the scheme abruptly. However, to rectify the situation, I propose to raise the rates of compounded levy from the existing Rs.1.5 lakhs per chamber per month to Rs.2 lakhs per chamber per month and from Rs.2 lakhs per chamber per month to Rs.2.5 lakhs per chamber per month. My proposals also include some modifications in the scheme in order to plug the loopholes.

Units engaged in the texturising of duty paid polyester yarn would henceforth pay specific rate of excise duty. This should reduce the valution disputes in respect of these units.

Small scale units enjoy duty free exemption on clearances up to Rs.50 lakhs a year. I am unable to raise this limit. However, with effect from 1st April 2000, I propose to rationalize the special schemes prevalent for cosmetics and toilet preparations, air-conditioning and refrigerating machinery and their parts, tread rubber and articles of plastics to fall in line with the general scheme of exemption for small scale units.

Sir, I now come to the next part of my proposals which relate to streamlining and simplification of the system. These are aimed at unshackling the excise procedures from the slavery of complexities and rigidities, and making them simple and user-friendly. I may add that like my rate-related proposals, these also go much beyond minor adjustments and mark a fundamental and even a dramatic departure from the current practices.

With effect from 1st July 2000, all statutory records in excise would be dispensed with. Excise department would rely upon the manufacturer's records. This completes the process initiated by me in my last budget in this regard.

From 1st April 2000, excise assessees would be allowed to pay the excise dues in fortnightly instalments. With this proposal I am putting an end to the age-old practice of day-to-day payment system of excise duties. For the small scale sector, the monthly payment scheme, that I had introduced last year, would continue.

Next, I want to make the valuation mechanism simple, user-friendly and along commercially acceptable lines. From 1st July, 2000, I propose to replace the existing section 4 of Central Excise Act which is based on the concept of "normal price" by a new section based on "transaction value" for assessment. This is a path breaking departure from the traditional approach.

The House is aware that several items are assessed to excise duty on the basis of Maximum Retail Price. This system is largely free from disputes and has been generally welcomed by the industry. I propose to extend MRP based assessment to about two dozen new items. I also propose to extend this scheme to more items during the course of the year.

I also propose to rationalize the rates of duties applicable to medicines and toilet preparations under the Medicinal and Toilet Preparations (Excise Duties) Act. The MRP-based assessment provisions are also being extended for assessment under this Act. These measures would considerably simplify the collection of excise duty by the States and improve their revenues from these duties. These changes will come into force from a notified date. In addition to the above I am rationalizing the provisions relating to payment of interest and penalty on default. The details are contained in the Finance Bill.

This completes my package of restructuring and rationalisation on the excise side. Trade and Industry should now breathe easy.

I shall now deal with my proposals relating to customs duties

I am conscious that in this area, I face serious constraints. We have to maintain a judicious balance between the need for providing adequate protection and growth impulses to the domestic industry and calibrating tariffs to international levels. We also need to carry the reform and rationalization process further.

Taking all factors into consideration, I propose to reduce the peak rate of basic customs duty from 40% to 35%, thereby reducing the total number of customs duty rates from 5 to 4, i.e. 35%, 25%, 15% and 5%

The surcharge of 10%, which I am constrained to continue on revenue considerations, will also apply to the new peak rate of 35%. Crude oil and petroleum products, certain WTO bound items and gold and silver would continue to be exempt.

The House may recall that I had imposed a special additional duty (SAD) of customs in my budget proposals for 1998-99. This had made manufacturer-importers quite sad. But traders were glad because they were exempted. I am correcting the discrimination by withdrawing this exemption. Now all importers would pay this duty. SAD would, however, not apply to petroleum products.

Consequent to our international trade treaty obligations, several hundred items will be placed on the free list for imports effective 1.4.2000. Most of these are consumer goods and a number of them are agricultural products. To accord adequate tariff protection for these items, they are being placed at the peak rate (35% plus surcharge), except for a few items like capital goods. A number of agricultural and horticultural products placed on the free list of import in earlier years are also being brought to the peak rate to ensure adequate protection to our farmers.

Furthermore, for a handful of sensitive agricultural products (wheat, rice, sugar and edible oils), in which our experience with supply management has underlined the importance of occasional tariff adjustments, I am making suitable enabling provisions to fix the statutory tariff rates at appropriately high levels. This will give the necessary flexibility for adjusting the applied rates. Customs is not all about raising revenues. It is also a powerful tool for building our industrial capabilities and improving our international competitiveness. I propose to take several measures in this regard, picking up three sectors for special attention. These are integral parts of the "convergence revolution" which is fast becoming a reality.

First, and foremost, the Information Technology (IT) sector, which leads the current excitement. I propose to reduce the customs duty on several items for the IT sector.

These include:

Computers, from 20% to 15%;
Mother boards, from 20% to 15%;
Floppy diskettes, from 20% to 15%;
Specified capital goods for manufacture of semi conductors and ICs, from 15% to 5%.
Microprocessor for computers, from 5% to Nil;
Memory storage devices, from 5% to Nil;
CD ROMs, from 5% to Nil;
Integrated circuits and microassemblies from 5% to Nil; and
Data graphic display tubes for colour monitors for computers from 5% to Nil.

Telecommunications is equally important. To become an economic superpower we must get connected, domestically and globally. I, therefore, propose to reduce the basic customs duty on specified raw materials for manufacture of optical fibres from 15% to 5%. I also propose to reduce the duty on cellular phones from 25% to 5% to improve their availability through proper channels and to curb the menace of the grey market, and on their battery packs from 40% to 15%. I am extending the concessional rate of 5% basic duty applicable to specified telecom equipment to internet service providers also.

The third is the entertainment industry, which is also an area of great promise. To reduce the cost of cinematography for the film industry and provide access to the latest technology, I propose to reduce duty on cinematographic cameras, and other related equipment from 40% to 25%. I also propose to reduce the basic customs duty on colour positive films in jumbo rolls and colour negative films in rolls of certain sizes from 15% to 5%. They shall also be exempt from CVD.

I would like to cover one more sector in this context. India can be a world leader in jewellery exports, as it is for gems. I propose to reduce the basic customs duty on platinum and non-industrial diamonds from 40% to 15% in order to encourage production of quality jewellery and to provide a fillip to jewellery exports.

To give effect to our agreements with the European Union and the United States, I propose to adjust the customs duties on fibres, yarns, textile fabrics and garments. As a result, several varieties of fabrics and garments would henceforth be subjected to the higher of ad-valorem or specific rates of duties prescribed for them.

As far as petroleum sector is concerned, the international prices of crude oil and petroleum products prevalent over some time now have been putting considerable strain on our refineries and distorting the oil pool account. This is accentuated by the fact that prices of petroleum products have not been fully decontrolled so far. I, therefore, propose to reduce the basic customs duty on crude oil from 20% to 15% and on petroleum products from 30% to 25%, except on kerosene for parallel marketing, the basic duty on which is being raised to 35%, from 30%.

In several cases the bound rates are to be reduced as part of our international commitment. I do not wish to take the time of the House by going into details. But they do have some revenue implications.

Mr. Speaker Sir, last year, I had proposed the abolition of Finance Minister's discretionery power to grant ad hoc exemptions of customs and excise duties except for goods of strategic nature, or for charitable purposes. I am pleased to inform the House that this self-denying rule has helped the Government save about Rs.500 crore this year.

I shall now mention a few small, but significant, measures for procedural improvements and redressal of the problems of taxpayers. To curtail the so called "show cause notice Raj " in customs and central excise, I have decided that henceforth, show cause notices involving duty amount of more than Rs.1 crore would be issued only with the approval of the Chief Commissioner of Customs and Central Excise. Other show cause notices would require approval of the Commissioner of Customs and Central Excise.

It cannot be disputed that the tax due from a defaulter should flow to the exchequer at the earliest in public interest. At present, penalty equal to 100% of the duty evaded is payable, and this is mandatory, even if someone makes the payment immediately after the adjudication order is passed. With a view to encouraging payment of tax due, I have now proposed that if the amount of tax evaded is paid along with interest within 30 days of the communication of the order, a penalty equal to only 25% of the duty evaded would be payable. I hope this carrot will be found preferable to the stick, which is bound to follow if tax is not paid in time.

Continued

Budget on Rediff | Dun & Bradstreet Budget Special | The Run-up
Budget Process | Budget Hotlinks | NDA Government & Economy
Ministry of Finance: Economic Survey 1999-2000 | Budget 2000 document

Tell us what you think of this Budget 2000 coverage