India cuts excise duty, service tax rates to stimulate economy

The Finance Minister Shri Pranab Mukhejee has announced several new concessions to provide further stimulus to the Indian economy. Even though the signals are encouraging, the full impact of the recession in other parts of the world specially Europe and Asia is yet to unfold.

Due to the strong export linkages with these economies, it is likely that the Indian economy may feel further impact in coming months. To counter any such effects, the UPA Government has taken decisions to cut central excise duty and service tax.

The Government had announced General reduction in Excise Duty rates by 4 per cent points was made with effect from 7.12.2008. It is now being extended beyond 31 March, 2009.

In addition, it has now been decided to reduce the general rate of Central Excise duty from 10 per cent to 8 per cent.

To retain the rate of central excise duty on goods currently attracting ad valorem rates of 8 per cent and 4 per cent respectively.

To reduce the rate of central excise duty on bulk cement from 10 per cent or Rs. 290 PMT, whichever is higher to 8 per cent or Rs.230 PMT, whichever is higher.

The Government is keen that the business confidence in the Services sector is restored. It is also our objective that the dispersal between CENVAT rate and the Service Tax rate is reduced with a view to move towards the stated goal of a Uniform Goods and Service Tax. In line with this objective, it has been decided to reduce the rate of service tax on taxable services from 12 percent to 10 per cent.

To provide relief to the power sector, Naptha imported for generation of electric energy has been fully exempted from basic Customs Duty. This exemption which was available upto 31 March 2009, is now being extended beyond that date.

Section 10 AA of the Income Tax provides for exemption in respect of export profits of a unit located in a Special Economic Zone (SEZ). The export profits are required to be computed with reference to the total turn over of the assessee. This has resulted in discriminatory treatment of assessees having units located both in SEZ and the Domestic Tariff Area (DTA) vis-à-vis assessees having units located only within the SEZs. It has now been decided to remove this anomaly through necessary changes in the Act.

Hon'ble Members may recall that in my Budget Speech, I had indicated that we may have to review the ceiling of fiscal deficit that the States can incur in 2009-10 in terms of the debt consolidation and relief facility. As a part of the first stimulus package, it was increased by 0.5 per cent to 3.5 per cent of the Gross State Domestic Product (GSDP) for 2008-09. To spur the development of infrastructure and employment generation, this arrangement is being extended to 2009-10 with the possibility of further review, if required, in the coming months.

Our priorities are clear. Rapid development of infrastructure, both in rural and urban areas, and agriculture growth leading to employment generation and distributive justice tops the list. For us economic growth is an instrument for development and not an end in itself. Economic growth has to be both inclusive and equitable. It must provide social justice and lead to the empowerment of Aam Aadmi. In the last five years, the UPA Government has moved steadfastly in that direction. But a social revolution which must flow from these measures is a long process and has to be worked out carefully and systematically, not only through economic growth and mobilization of resources, but also through institutional changes and mobilization of the masses. It is my earnest hope that we will all walk together in the journey ahead to achieve this shared vision.

Source : Equity Bulls

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