Government of IndiaMinistry of Finance Budget 97-98




Memorandum

Part3

INTEREST-TAX

Reduction in the rate of interest tax

Under the existing provisions of the Interest-tax Act, 1974 credit institutions including banks are charged interest tax in respect of interest receivable by them on loans at the rate of three per cent. of the chargeable interest.

In order to provide greater liquidity to the banking companies, public financial institutions, state financial corporations and any other public financial company, the Bill proposes to reduce the rate of tax to two per cent. of the chargeable interest.

The proposed amendment will take effect from 1st April, 1998 and will, accordingly, apply in relation to assessment year 1998-99 and subsequent years. [ Clause 57]

Power to issue instructions

Under the existing provisions of the Interesttax Act, various sections of the Incometax Act as specified therein, apply with suitable modifications with regard to the administration of the Interesttax Act also. However, section 119 of the Incometax Act, which gives powers to the Board to issue instructions, etc. is not specified under section 21 of the Interesttax Act. In order to remove any doubt on this issue, it is proposed to amend section 21 of the Interesttax Act, to provide that the provisions of section 119 of the Incometax Act shall apply with necessary modifications to the Interesttax Act also.

The proposed amendment will take effect retrospectively from 1st October, 1991. [ Clause 58]

EXPENDITURE-TAX

Exemption from the levy of expenditure tax in case of new hotels in remote areas

Under the provisions of the Expenditure-tax Act, 1987, tax is charged on expenditure incurred in a hotel where the room charges for any unit of residential accommodation are Rs.1200 or more per day per individual.

It is proposed to amend the Expenditure-tax Act to secure that the expenditure tax will not be charged for a period of ten assessment years commencing from 1.4.1998 on any expenditure incurred in a new hotel in a hilly or rural area or a place of pilgrimage or such other place as the Central Government may specify in accordance with the provisions of section 80-IA of the Income-tax Act, 1961. These concessions will be available to eligible hotels which start functioning during the period from 1.4.1998 to 31.3.2002. However, hotels located in metropolitan cities of Calcutta, Chennai, Delhi and Mumbai will not be eligible for exemption from the expenditure tax.

The proposed amendments will take effect from 1st April, 1999 and will, accordingly, apply in relation to assessment year 1999-2000 and subsequent years. [ Clause 59]

THE VOLUNTARY DISCLOSURE OF INCOME AND WEALTH SCHEME, 1997

In order to mobilise resources and to channelise funds into priority sectors of the economy, and to offer an opportunity to persons who have evaded tax in the past, to declare their undisclosed income, pay a reasonable tax and in future adopt the path of rectitude and civic responsibility, a voluntary disclosure of income and wealth scheme is proposed to be introduced. The scheme shall have the following salient features:

(i) The scheme will cover all persons, corporate or noncorporate. The tax payable on the disclosed income will be 30% in the case of individuals and 35% in the case of other declarants viz. corporates and firms. The tax on the voluntarily disclosed income or wealth would have to be paid before making the declaration, and proof of such payment must be attached along with the declaration. However, where tax is paid within three months of the filing of the declaration, interest @ two per cent. for every month or part of a month will become chargeable . If such tax is not paid within three months of filing the declaration, it will be deemed to be void.

(ii) The person making a disclosure would have to file a declaration in a prescribed form before the Commissioner of Incometax. The Commissioner shall, on an application made by the declarant, grant a certificate to him setting forth the particulars of the voluntarily disclosed income and the amount of incometax paid in respect of the same. A person may make a declaration in respect of any income chargeable to tax for any assessment year prior to the assessment year 199899

(a) for which he has failed to furnish a return under section 139 of the Incometax Act,

(b) for which he has failed to disclose in a return of income furnished by him under the Incometax Act before the date of commencement of the Act,

(c) which has escaped assessment in terms of section 147 as it stood prior to 1.4.1989 and thereafter.

(iii) The amount of voluntarily disclosed income shall be allowed to be credited by the declarant in the books of account, if any, maintained by him for any source of income or any other record. The credit so made should be intimated to the Assessing Officer. The voluntarily disclosed income will not be included in the total income of the declarant for the purpose of assessment for any year under the Incometax Act. There will be no assessment proceeding in respect of the disclosed income and the tax liability in respect of such income will be finally settled on payment of the tax under the scheme. Where the voluntarily disclosed income is represented by any cash, bullion, investment in shares or any other assets, wealth-tax shall not be payable by the declarant in respect of such assets.

(iv) All particulars contained in a declaration will be treated as confidential and no court or authority will be entitled to require any public servant or the declarant to produce before it any such declaration or part thereof or to give any evidence in this regard. Furthermore, nothing contained in any declaration shall be admissible in evidence against the declarant for the purposes of any proceeding relating to imposition of penalty or the purposes of prosecution under any of the following Acts:

(i) Incometax Act, 1961,

(ii) Wealthtax Act, 1957,

(iii) Foreign Exchange Regulation Act, 1973 and

(iv) Companies Act, 1956.

However, the immunities will not extend to offences under the following Acts:

(i) Chapter IX or Chapter XVII of the Indian Penal Code (45 of 1860),

(ii) The Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985),

(iii) The Terrorists and Disruptive Activities (Prevention) Act, 1987 (28 of 1987),

(iv) The Prevention of Corruption Act, 1988 (49 of 1988) and

(v) for the purpose of enforcement of any civil liability.

The scheme shall not apply to any person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

(v) A person in whose case a search under section 132 of the Incometax Act has been initiated or where books of account, other documents or other assets have been requisitioned under section 132A will not be entitled to make a declaration in respect of the previous year in which the search was made or any earlier previous year. Disclosure by such persons would however, be allowed in respect of any previous year following the previous year in which the search was carried out. Further, in cases where a survey under section 133A has been carried out, no declaration of income or wealth will be allowed in respect of the previous year in which such survey was made. Persons who have been served with a notice under section 142(1) or section 148 of the Incometax Act and where the return has not been furnished before the commencement of the proposed Act will also be barred from making a disclosure in respect of the previous year relevant to the assessment year for which the notice has been served.

(vi) The conditions for the voluntary declaration of wealth will largely be along the above lines.

The scheme shall commence from the date of its notification in the Official Gazette and shall remain in force up to the 31st day of December, 1997. [ Clauses 60 to 77]


CUSTOMS

ABBREVIATIONS

CT : First Schedule to the Customs Tariff Act,1975 (51 of 1975)

The proposals include the following:-

A. GENERAL

The First Schedule to the Customs Tariff Act, 1975 is being amended vide relevant clause of the Bill to give effect to the tariff changes relating to the Customs Duties.

B. Major Proposals involving changes in rates of duty, whether by amendment of tariff rates or by notifications.

1. Reduction in peak rate of customs duty from 50% to 40% except on dried grapes, alcoholic beverages, ball or roller bearings, passenger baggage and imports by couriers.

2. Reduction in customs duty on:

(a) oleopine resin from 20% to 10%;

(b) wool grease from 40% to 20%;

(c) vegetable or animal fats and oils( excepting coconut oil) from 40% to 30%;

(d) food preparations for infant use from 15% to 10%;

(e) specified food items imported by approved hotels from 50% to 25%.

3. Prescribing uniform duty of 100% on beer made from malt, wines and other fermented beverage falling under heading Nos.22.03,22.04,22.05 and 22.06 of CT.

4. I Reduction in customs duty on:

(a) natural graphite from 40% to 30%;

(b) sulphur,asbestos,quicklime and limestone from 40% to 25%.

II Reduction in customs duty on ores and concentrates from 10% to 5%.

5. Reduction in customs duty on :

(a) coking coal of ash content less than 12% from 5% to 3%;

(b) coal and coke from 20% to 10%;

(c) naphthalene from 30% to 20%.

6. Peak rate reduction in customs duty on:

(a) inorganic chemicals of Chapter 28 of CT ( except titanium oxide) from 40% to 30%;

(b) organic chemicals of Chapter 29 of CT from 40% to 30%.

7. Full exemption from customs duty on ammonia for non- fertiliser use.

8. Reduction in customs duty on:

(a) phenol from 30% to 25%;

(b) methanol from 30% to 20%.

9. Increase in customs duty on specified chemicals from 25% to 30%.

10. Reduction in customs duty on:

(a) mixed alkylbenzenes from 30% to 20%;

(b) Limulus Amebocyte Lysate test kits from 25% to 10%;

(c) polyester subbed base for X-ray and graphic art films from 40% to 20%.

11. Full exemption from customs duty on specified life saving drugs/ medicines and diagnostic kits is extended to import for personal use by air/post.

12. Reduction in customs duty on homoeopathic drugs from 25% to 20%.

13. Reduction in customs duty on dyes, pigments(other than based on titanium dioxide), paints and varnishes from 40% to 30%.

14. Reduction in customs duty on albuminoidal substances, glues, enzymes and modified starches from 40% to 30%.

15. Reduction in customs duty on isolated soya protein from 40% to 10%.

16. Full exemption for specified goods imported for the manufacture of ELISA kits.

17. Reduction in customs duty on photographic goods from 30% to 25%.

18. Reduction in customs duty on:

(a) catalysts from 30% to 25%;

(b) miscellaneous chemical products of Chapter 38 of CT from 40% to 30%.

19. Reduction in customs duty on:

(a) specified raw material for FRP rod from 10% to 5%;

(b) articles of plastics of Chapter 39 of CT from 40% to 30%.

20. Increase in customs duty on FRP rod from 10% to 20%.

21. Reduction in customs duty on retreaded aircraft tyres from 30% to 3%.

22. Full exemption from customs duty on raw, tanned or dressed furskins of lamb.

23. Full exemption from customs duty on wood logs, fuel wood, wood chips and wood charcoal.

24. Reduction in customs duty on specified filter paper and paper board from 50% to 20%.

13
25. Full exemption from customs duty on plans, designs and drawings.

26. Reduction in customs duty on:

(a) wool waste from 30% to 20%;

(b) wool (apparel grade) from 25% to 20%.

27. Reduction in customs duty on fine or coarse animal hair (not carded or combed) from 50% to 20%.

28. Reduction in customs duty on flax fibre and acetate tow from 30% to 20%.

29. Reduction in customs duty on rags from 30% to 25%.

30. Reduction in customs duty on:

(a) rough synthetic stone from 50% to 10%;

(b) cold rolled coils of steel from 30% to 25%;

(c) Tinned Mill Black Plates (TMBP) from 25% to 20%;

(d) ferro alloys from 25% to 20%;

(e) pig iron from 20% to 10%;

(f) rerollable steel scrap from 30% to 20%.

31. Reduction in customs duty on:

(a) nickel and articles thereof from 20% to 10%;

(b) tin and articles thereof from 30% to 20%.

32. Increase in customs duty on unwrought aluminium from 10% to 20%.

33. Reduction in customs duty on tools and implements from 30% to 25%.

34. Reduction in customs duty on:

(a) general machinery and parts of Chapters 84 and 85 of CT from 25% to 20%;

(b) items of machinery other than consumer goods, office machinery, small motors and wires and cables and goods directly connected with production of commodities from 50% to 30%;

(c) complete ozone generators from 25% to 10%;

(d) catalytic converters and parts thereof from 25% to 5%;

(e) CNG kits and their parts from 10% to 5%;

(f) parts of specified textile machinery from 25% to 10%.

35. Reduction in customs duty on goods required for setting up of new projects with non-ozone depleting substances technology to Nil.

36. Customs duty on projects other than fertilizer projects, unified at 20%.

37. Extending project import benefits to road development projects of National Highway Authority of India.

38. Reduction in customs duty on:

(a) computer parts excluding PPCB from 20% to 10%;

(b) catridge tape drives and digital video disk drives from 20% to 10%;

(c) integrated circuits and micro assemblies from 20% to 10%.

39. Full exemption from customs duty on computer software and on braille printers/embossers and braille displays specially designed for computer systems.

40. Reduction in customs duty on:

(a) colour data/graphic display tubes from 20% to 10%;

(b) colour picture tube from 35% to 30%.

41. Reduction in customs duty on:

(a) finished telecommunication equipment from 40% to 30%;

(b) parts and sub-assemblies of telecommunication equipment from 30% to 20%;

(c) parts of cellular telephones and pagers from 30% to 20%.

42. Increase in customs duty on specified motor vehicle parts for light commercial vehicles of payload not exceeding 4000 kg from 25% to 40%.

43. Reduction in customs duty on ships for breaking from 10% to 5%.

44. Reduction in customs duty on:

(a) raw ophthalmic blanks for making optical lenses from 50% to 20% subject to certain conditions;

(b) measuring and testing instruments and parts thereof from 25% to 20%;

(c) parts of cameras and photocopiers from 50% to 25%;

(d) equipment for medical, surgical, dental or veterinery use from 30% to 20%;

(e) optical fibre for optical fibre cables from 30% to 25%;

(f) specified equipment required for hotels from 35% to 25%.

45. Full exemption from customs duty on linear accelerators of beam energy 15 MeV and above.

46. Reduction in customs duty on laboratory chemicals and drugs for personal use, if imported by post or air from 50% to 30%.

47. Reduction in customs duty on toys, games and sports requisites from 30% to 25%.

48. Reduction in customs duty on :

(a) specified horological raw materials for manufacture of components of wrist watches from 20% to 10%;

(b) clock and watch parts from 50% to 25%;

(c) watch cases of base metals from 50% to 30%.

49. Reduction in customs duty on baggage from 60% to 50%.

UNION EXCISE DUTIES

ABBREVIATIONS

BED : Basic Excise duty MODVAT : Modified Value Added Tax

AED : Additional excise duty in lieu of sales tax PMT : Per Metric Tonne

CET : Schedule to the Central Excise Tariff Act,1985(5 of 1986)

Unless otherwise indicated, the excise duty rates refer to basic excise duty.

The proposals include the following:

A. GENERAL

(1) The Central Excise Act, 1944 is being amended -

(i) to make provision for charging of excise duty on specified goods with reference to maximum retail price.

(ii) provide for cost auditing of accounts in case of misuse of MODVAT credit Scheme.

(2) The Schedule to the Central Excise Tariff Act, 1985 is being amended vide relevant clauses of the Finance Bill to give effect to the Tariff changes relating to the Union Excise Duties .

B. Major Proposals involving changes in rates of duty, whether by amendment of tariff rates or by notifications.

C. Three new rates of duty, namely, 8%,13% and 18% have been introduced this year.

1. Reduction in excise duty on:

(a) malt from 10% to 8%;

(b) vegetable waxes from 20% to 18%;

(c) chewing gum from 20% to 18%;

(d) sugar confectionery from 10% to 8%;

(e) cocoa preparations from 20% to 18%;

(f) malted foods from 20% to 18%;

(g) biscuits from 10% to 8%;

(h) instant coffee and instant tea from 25% to 18%;

(i) miscellaneous edible preparations (sharbat etc.) from 20% to 18%;

(j) vinegar and denatured ethyl alcohol from 20% to 18%.

2. Prescribing specific rate of duty of Rs.500 PMT on molasses.

3. Increase in excise duty on condensed milk and ice cream from 10% to 13%.

4. Increase in excise duty on biris from Rs.5 per thousand to Rs.6 per thousand.

5. Imposing excise duty of 8% on:

(a) starch;

(b) lac, gums, resins and other vegetable saps and extracts manufactured with the aid of power;

(c) branded jams, jellies, juices, sauce and soup.

6. Revision in specific rates of excise duty (BED + AED) on cigarettes as indicated below:-

Rs. per thousand cigarettes

Present Proposed

Non filter Cigarettes

(a) not exceeding 60 mm in length 75 90

(b) exceeding 60 mm but not exceeding 70 mm 315 350

Filter Cigarettes

(c) not exceeding 70 mm in length 430 500

(d) exceeding 70 mm but not exceeding 75 mm 800 820

(e) exceeding 75 mm but not exceeding 85 mm 1070 1100

7. Reduction in excise duty on :

(a) white cement, aluminous cement, sagol, high alumina cement and others from 30% to 25%;

(b) concentrates and ash and residues of metals from 10% to 8%;

(c) products of coal tar distillation from 20% to 18%.

8. Reduction in excise duty on inorganic and organic chemicals of Chapters 28 and 29 of CET from 20% to 18%.

9. Reduction in excise duty on non-generic medicaments used in ayurvedic, siddha, unani, homoeopathic or bio-chemic system of medicines from 10% to 8%.

10. Reduction in excise duty on:

(a) fertilisers used as imputs for chemicals from 20% to 18%;

(b) tanning or dyeing extracts from 20% to 18%;

(c) copper sulphate from 10% to 8%.

11. Increase in excise duty on:

(a) anaesthetics from 5% to 8%;

(b) saccharin and its salts from 10% to 13%;

(c) bulk drugs (general) from 10% to 18%;

(d) medicinal grade oxygen/hydrogen peroxide from 5% to 8%.

12. Prescribing excise duty of 13% on silicon in all forms.

13. Full exemption from excise duty on writing ink.

14. Reduction in excise duty on:

(a) essential oils and resinoids from 20% to 18%;

(b) cosmetics and toilet preparations from 40% to 30%;

(c) perfumed hair oil and bath oil from 20% to 18%;

(d) tooth paste and tooth powder from 10% to 8%;

(e) washing soap from 10% to 8%;

(f) toilet soap from 20% to 18%;

(g) detergents from 25% to 18%.

15. I Increase in excise duty on photographic & cinematographic goods and chemical preparations for photographic use except X-ray films/plates from 15% to 18%.

II Reduction in excise duty on X-ray films/plates from 15% to 13%.

16. Reduction in excise duty on insecticides, pesticides and herbicides from 10% to 8%.

17. Reduction in excise duty on:

(a) ready- mix concrete from 20% to 13%;

(b) specified plastic based diagnostic or laboratory re-agents from 25% to 18%;

(c) specified miscellaneous chemical products of Chapter 38 of CET from 20% to 18%.

18. Revision in specific rates of excise duty on matches manufactured by mechanised sector units as indicated below:

Rs. per 100 boxes/packs

Boxes / packs containing present proposed

upto 40 matches 1.92 2.40

50 matches 2.40 3.00

300 matches 14.40 18.00

19. Increase in excise duty on:

(a) specified polymers from 20% to 25%;

(b) tubes, pipes ,hoses and fittings of plastics from 20% to 25%;

(c) strips of plastics for specified use from 10% to 13%.

20. Reduction in excise duty on:

(a) specified polyethelene coated paper/board from 20% to 18%;

(b) PVC corrugated roofing sheets from 20% to 18%.

21. I Reduction in excise duty on specified rubber and rubber products from 20% to 18%.

II Reduction in excise duty on rubber pipes and hoses from 25% to 18%.

22. I Prescribing 13% excise duty on tyres and tubes for two-wheeled motor vehicles and tractor rear in place of the present specific rates.

II Prescribing excise duty of 30% on all tyres and tubes for such tyres (except those for two-wheeled motor vehicles and tractor rear) in place of present specific rates.

III Prescribing excise duty of 25% on all flaps for tyres presently attracting Nil or specific rate of duty.

23. Increase in excise duty on:

(a) tread rubber for first clearance upto Rs.150 lakhs in a financial year from 15% to 18%;

(b) solid or cushion tyres and interchangeable tyre treads from 20% to 25%.

24. Reduction in excise duty on travel goods and leather manufactures from 25% to 18%.

25. Increase in excise duty on manufactures of fur skins and artificial fur from 20% to 25%.

26. Reduction in excise duty on :

a) particle and similar board and fibre board from 10% to 8%;

b) veneer sheets, wood continuously shaped and plywood from 20% to 18%.

27. Reduction in excise duty on:

a) paper and paperboard from 20% to 18%;

b) paper, paperboard and articles manufactured by using atleast 75% unconventional raw material for clearances in excess of 10000 tonnes in a financial year ; specified cartons and boxes, from 10% to 8%.

28. Increase in excise duty on kraft paper and paperboard used for the manufacture of cartons for packing horticultural produce from nil to 8%.

29. Reduction in excise duty on transfers from 20% to 18%.

30. Reduction in excise duty on:

(a) polyester filament yarn from 40% to 30%;

(b) man-made and blended, fibres and yarns (excepting PFY and NFY) from 20% to 18%.

31. Reduction in the deemed credit available to independent processor and composite mills processing other than 100% cotton fabrics from 70% / 60% to 60% / 50%.

32. Full exemption from excise duty on all jute manufactures.

33. I Reduction in excise duty on sanitary towels, tampons, napkins for babies and similar sanitary articles from 15% to 13%.

II Rationalisation of excise duty by reduction on :

(a) textile goods currently attracting 10% to 8%;

(b) textile goods currently attracting 20% to 18%;

(c) textile goods (excepting nylon filament yarn) currently attracting 30% to 25%.

34. Reduction in excise duty on:

(a) articles of cement and asbestos from 20% to 18%;

(b) glazed tiles from 30% to 25%;

(c) glass and glassware from 20% to 18%;

(d) kitchen and tableware of glass from 10% to 8%.

(e) pressure cooker from 10% to 8%;

(f) articles of base metal from 20% to 18%.

35. Increase in excise duty on head gear and parts from 10% to 13%.

36. Reduction in excise duty on railway passenger coaches and luggage vans from 20% to 18%.

37. Reduction in excise duty on :

(a) cars for physically handicapped from 30% to 25%;

(b) taxis from 30% to 25%;

(c) electrically operated vehicles from 10% to 8%;

(d) bodies of motor vehicles from 20% to 18%.

38. Increase in excise duty on:

(a) motor vehicles for transport of more than 6 persons but not more than 12 persons (excluding driver) from 20% to 25%;

(b) ships and boats from Nil to 8%.

39. Reduction in excise duty on computers and parts from 15% to 13%.

40. Reduction in excise duty on:

(a) colour television sets from 20% to 18%;

(b) radio sets from 10% to 8%.

41. Reduction in excise duty on:

(a) rural automatic exchanges and specified telecommunication equipment from 15% to 13%;

(b) fibre optical cables from 20% to 18%;

(c) electrical signalling safety or traffic control equipment for railways from 15% to 13%;

(d) transmission apparatus for radio broadcasting and television from 15% to 13%.

42. Increase in excise duty on VCR and VCP from 15% to 18%.

43. Prescribing uniform ad valorem rate of 13% on picture tubes for black and white television sets.

44. Imposing excise duty of 8% on:

(a) unrecorded/recorded audio cassettes;

(b) specified recorded video cassettes.

45. Increase in excise duty on printed circuits and resistors from 15% to 18%.

46. Reduction in excise duty on semi-conductor devices, capacitors, integrated circuits and micro-assemblies from 20% to 18%.

47. Reduction in excise duty on photographic/ cinematographic equipment and photocopiers from 20% to 18%.

48. Increase in excise duty on all testing, measuring and analysing equipment from 10% to 13%.

49. Reduction in excise duty on clocks and musical instruments from 10% to 8%.

50. I Reduction in excise duty on watches upto value of Rs.600 per watch from 10% to 8%.

II Increase in excise duty on watches of value exceeding Rs.600 per watch from 10% to 13%.

51. Prescribing excise duty of 8% on:

(a) sun glasses other than those used for correcting vision;

(b) pens of value exceeding Rs.100 per piece.

52. Reduction in excise duty on:

(a) pre-fabricated buildings from 10% to 8%;

(b) furniture from 20% to 18%;

(c) games and sports requisites from 15% to 13%;

(d) toilet sets for personal use from 40% to 30%;

(e) typewriter and similar ribbons from 20% to 18%;

(f) cigarette lighters from 20% to 18%.

53. Full exemption from excise duty on goods procured by Public funded Research Institutions or non-commercial Research Institutions subject to certain conditions.

54. Increase in excise duty on general machinery of Chapters 84 and 85 of CET from 10% to 13%.

55. Reduction in excise duty on parts of general machinery of Chapter 84 and 85 of CET from 15% to 13%.

56. Reduction in excise duty on consumer goods from 20% to 18%.

57. Reduction in excise duty on air-conditioners, compressor and other parts of refrigerating and air-conditioning machinery from 40% to 30%.

58. Full exemption from excise duty on milking machines and dairy machinery.

59. Increase in excise duty on electrical transformers, static convertors and inductors from 10% to 13%.

60. Reduction in excise duty on:

(a) electrical batteries and accumulators from 20% to 18%;

(b) insulated wires and cables from 25% to 18%.

61. Reduction in excise duty on fluorescent bulbs from 15% to 13%.

62. Full exemption from excise duty on goods required for setting up of new projects with non-ozone depleting substances technology.

63. Changes in the SSI exemption scheme effective from 1.4.1997:

(i) Abolition of charging differential rates of excise duty on clearance upto Rs.75 lakhs;

(ii) Clearances above Rs.30 lakhs but not exceeding Rs.50 lakhs are to be charged to duty at a flat rate of 3% with no Modvat benefit on inputs;

(iii) Clearances above Rs.50 lakhs but not exceeding Rs.100 lakhs are to be charged to duty at a flat rate of 5% with no Modvat benefit on inputs;

(iv) Clearances above Rs.100 lakhs are to be charged to duty at normal rates with Modvat benefit on inputs;

(v) Option to pay full normal duty from the beginning continues;

(vi) Following items are excluded from the purview of SSI exemption scheme:

(a) cold rolled stainless steel pattis/pattas

(b) aluminium/copper circles

(c) texturised man-made yarn

(d) unprocessed woven pile/chenille fabrics

(e) cotton yarn

(f) yarn of synthetic and artificial staple fibres.

64. Following important changes have been made in the MODVAT scheme:

(a) MODVAT credit will not be permissible on inputs which were cleared by the manufacturer with intention to evade duty;

(b) MODVAT credit of additional duty of customs on goods imported as project import will be permissible to the extent of 75% of such duty.

SERVICE TAX

Imposing service tax at the rate of 5% on services rendered by:

(a) transporters of goods by road;

(b) consulting engineers ;

(c) custom house agents;

(d) steamer agents;

(e) air travel agents;

(f) clearing and forwarding agents;

(g) outdoor caterers ;

(h) pandal contractors and mandap keepers;

(i) man-power recruitment agencies/consultants; and

(j) tour operators including car rentals.

The tax will be leviable on the gross amount charged by the service renderer from the client.

Estimated net revenue effect

Proposals relating to reduction in customs duty are estimated to result in a net loss of Rs.2625 crore in a financial year and, in the case of excise duties, proposals are broadly revenue neutral. The buoyancy and the growth momentum that these proposals would impart to the economy would more than compensate for losses worked out by conventional method. The estimated revenue gain from taxes on the new services is likely to be Rs.1200 crore in a financial year and Rs.900 crore for the year, 1997-98.

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