The following are excerpts from Part B (tax proposals) of Pranab Mukherjee's budget speech.
The life of a finance minister is not easy. As Hamlet, the Prince of Denmark, had said in Shakespeare's immortal words, "I must be cruel only to be kind."
Last year, I had set the compass for movement towards the Direct Tax Code (DTC) in Direct Taxes and GST in Indirect Taxes. My tax proposals for fiscal year 2012-13 mark further progress in that direction.
Last year, I provided relief to individual taxpayers by enhancing the exemption limit as a move towards DTC rates. Although DTC will not be effective from this year, I propose to introduce the DTC rates for personal income tax. I propose to enhance the exemption limit for the general category of individual taxpayers from Rs 1,80,000 to Rs 2,00,000. This measure will provide tax relief up to Rs 2,000 to every taxpayer of this category.
I also propose to raise the upper limit of the 20 per cent tax slab from Rs 8 lakh to 10 lakh. These changes will provide substantial relief to taxpayers.
I propose to allow individual taxpayers a deduction of up to Rs 10,000 for interest from savings bank accounts. This would help a large number of small taxpayers with salary incomes up to Rs 5 lakh and interest from savings bank accounts up to Rs 10,000 as they would not be required to file income tax returns.
I propose to allow a deduction of upto Rs 5,000 for preventive health check-up.
To promote investment in research and development, it is proposed to extend the weighted deduction of 200 per cent for RandD expenditure in an in-house facility beyond March 31, 2012 for a further period of five years.
In order to reduce transaction costs in the capital markets, I propose reduction in Securities Transaction Tax (STT) by 20 per cent (from 0.125 per cent to 0.1 per cent) on cash delivery transactions.
My proposals on Direct Taxes are estimated to result in a net revenue loss of Rs 4,500 crore for the year.
The share of services in taxes remains far below its potential. Looking at our vast commitments and to maintain a healthy fiscal situation, I propose to raise the service tax rate from 10 per cent to 12 per cent, with consequential changes in rates for services that have individual tax rates. There is a need to widen the tax base. I propose to tax all services except those in the negative list. The list comprises 17 heads.
The important inclusions in the negative list comprise all services provided by the government or local authorities, except a few specified services where they compete with private sector.
Pre-school and school education, recognised education at higher levels and approved vocational education, renting of residential dwellings, entertainment and amusement services and a large part of public transportation including inland waterways, urban railways and metered cabs.
In addition to the negative list, there is a list of exemptions which include health care, services provided by charities, religious persons, sportspersons, performing artists in folk and classical arts, individual advocates providing services to non-business entities, independent journalists, and services by way of animal care or car parking.
I have also exempted the services of business facilitators and correspondents to banks and insurance companies.
To make the life of those who already own an apartment a little easier, I propose to raise the exemption for the monthly charges payable by a member to a housing society from Rs 3,000 to Rs 5,000.
The year 2012 marks the beginning of the centenary year of Indian cinema. Despite the change in titles from Dada Saheb Phalke's Raja Harishchandra to Ra.One in recent times, the industry has played a pivotal role in unifying our country in the wake of her considerable diversity. To add to their spirit of celebration, I propose to exempt the industry from service tax on copyrights relating to recording of cinematographic films.
My proposals from service tax are expected to yield an additional revenue of Rs 18,660 crore.
Given the imperative for fiscal correction, I propose to now raise the standard rate from 10 per cent to 12 per cent, the merit rate from 5 per cent to 6 per cent, and the lower merit rate from 1 per cent to 2 per cent.
Big car, big tax
Large cars currently attract excise duty depending on their engine capacity and length. I propose to enhance the duty from 22 per cent to 24 per cent. In the case of cars that attract a mixed rate of duty of 22 per cent plus Rs 15,000 per vehicle, I propose to increase the duty and switch over to an ad valorem rate of 27 per cent.
Domestic producers of thermal power have been under stress because of high prices of coal. I propose to ease the situation by providing full exemption from basic customs duty and a concessional CVD of 1 per cent to steam coal for a period of two years till March 31, 2014. Full exemption from basic duty is also being provided to the following fuels for power generation: natural has and liquefied natural gas
I propose to reduce basic customs duty on machinery for surveying and prospecting from 10 per cent or 7.5 per cent to 2.5 per cent. In addition, full exemption from basic customs duty is being provided to coal mining projects.
Full exemption from import duty on specified equipment imported for road construction by contractors of ministry of road transport and highways, NHAI and state governments is being extended to contracts by Metropolitan Development Authorities.
India has potential for establishing itself as a hub for third-party Maintenance, Repair and Overhaul (MRO) of civilian aircraft. To actualise this potential, I propose to fully exempt from basic customs duty parts of aircraft and testing equipment imported for this purpose. It is also proposed to fully exempt both new and retreaded aircraft tyres from basic customs duty and excise duty.
To encourage enrichment of low-grade iron ore, I propose to reduce basic customs duty on plant and machinery imported for setting up or substantial expansion of iron ore pellet plants or iron ore beneficiation plants from 7.5 per cent to 2.5 per cent. My other proposals relating to the steel sector are as under:
To reduce basic customs duty on:
Coating material for manufacture of electrical steel from 7.5 per cent to 5 per cent
Nickel ore and concentrate and nickel oxide/ hydroxide from 2.5 per cent or 7.5 per cent to nil
To enhance export duty on chromium ore from Rs 3,000 per tonne to 30 per cent
To enhance basic customs duty on non-alloy, flat-rolled steel from 5 per cent to 7.5 per cent.
I propose to fully exempt automatic shuttle-less looms from basic customs duty of 5 per cent. Similarly, full exemption from basic duty is being accorded to automatic silk reeling and processing machinery as well as its parts.
Excise duty of 10 per cent is applicable to branded ready-made garments with abatement of 55 per cent from retail price. Along with increase in duty to 12 per cent, I propose to enhance the abatement to 70 per cent. As a result, the incidence of duty as a percentage of the retail price would come down from 4.5 per cent to 3.6 per cent.
Full exemption from basic customs duty on LCD and LED TV panels, and parts of memory card for mobile phones
It is proposed to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to six specified life-saving drugs/ vaccines. These are used for the treatment or prevention of ailments such as HIV-AIDS, renal cancer, etc.
In order to fully realise our potential in the realm of solar energy, solar thermal projects need encouragement. I propose to fully exempt plant and equipment, etc. for the initial setting up of such projects from special CVD. I propose to fully exempt a coating chemical used for compact fluorescent lamps, from basic customs duty. Excise duty on LED lamps is also being reduced to 6 per cent.
I propose to increase basic customs duty on standard gold bars; gold coins of purity exceeding 99.5 per cent and platinum from 2 per cent to 4 per cent and on non-standard gold from 5 per cent to 10 per cent. On the excise side, duty on refined gold is being increased in the same proportion from 1.5 per cent to 3 per cent. It is also proposed to impose basic customs duty of 2 per cent on cut and polished, coloured gem stones at par with diamonds.
I propose to increase basic excise duty on cigarettes of more than 65mm length by adding an ad valorem component of 10 per cent to the existing specific rates. The ad valorem duty would be chargeable on 50 per cent of the retail price on the pack.
I also propose to carry out a nominal increase in basic excise duty on hand-rolled bidis from 8 to 10 per thousand and on machine-rolled bidis from 19 to 21 per thousand.
Pan masala, gutkha, chewing tobacco, tobacco and zarda-scented tobacco in pouches are leviable to excise duty. The rates of duty specified per packing machine for these items are being stepped up taking into account improvements in the efficiency of machines used by this industry.
It is proposed to cut excise duty on matches manufactured by semi-mechanised units from 10 per cent to 6 per cent.
Completely built units of large cars/ MUVs/ SUVs having engine capacity above a prescribed threshold and whose value exceeds $40,000 per vehicle are permitted for import without type approval. Basic customs duty on such vehicles is being enhanced from 60 per cent to 75 per cent ad valorem.
My proposals on DT are estimated to result in a net revenue loss of Rs 4500 crore for the year. Proposals relating to indirect taxes are estimated to result in a net revenue gain of Rs 45,940 crore, leaving a net gain of Rs 41,440 crore.