Finance Bill

The Finance Bill will be debated in the Parliament on April 28, 2008. This brief would like to focus on the recommendations in the Bill and possible suggestions that can be made on them.

 

It should also touch upon the following features of the Bill briefly:

1. Loan waiver

2. Price rise/ inflation

3. Direct and Indirect taxes: Incidence of taxation

 

 

Requested by: Senior MP from Gujarat (Lok Sabha)

 

Due: April 23, 2008 

 

The Finance Bill: An Overview

 

The Union Budget, in its legislative form, contains two parts: the Appropriations Bill and the Finance Bill. The first concerns itself with the outlays for the next financial year, and the latter contains taxation proposals in order to finance those outlays. The Finance Bill, 2008 includes proposals amending both direct and indirect taxes. The principal changes that the Finance Bill, 2008 seeks to make can be explained as follows:

 

 

One of the biggest failures of the current Budget, and the Budgets preceding it, have been the inability to simply the tax structure in a substantial way. All efforts at simplication have been nominal and superficial.

 

Direct Taxes:

 

Indirect Taxes - Major changes:

 

Excise:

 

• General CENVAT rate reduced from 16 per cent  to 14 per cent 

• Excise duty has been reduced for the following items:

a.  Two Wheelers from 16 per cent to 12 per cent

b.  Small cars from 16 per cent to 12 per cent

c.  Hybrid cars from 24 per cent to 14 per cent

d.  Pharmaceutical products reduced from 16 per cent to 8 per cent

e.  Crude and unrefined suplphur from 5 per cent to 2 per cent

f.  Buses and Chassis from 16 per cent to 12 per cent

g.  Paper board from 12 per cent to 8 per cent

h.  Writing and printing packing papers from 12 per cent to 8 per cent

i.  water purification devices, sterile dressing pads, beakfast cereals from 16 per cent to 8 per cent

 

• Duty rates have been increased for the following items:

a.  Packaged software by about 4 per cent

b.  On non-filtered Cigarettes.

 

• Exemption has been granted for the following items:

a.  wireless data card, composting machines, coconut water, tea and coffee premixes

b.  Anti-AIDS drugs

c.  Refrigeration units above two tonne capacity

 

• Others

a.  Bulk cement Rs. 400 / MT or 14 per cent Advalorem whichever is higher

b.  Packaged cement Rs. 450 / MT

c.  Unbranded petrol @ 14.35 / Lt instead of Advalorem. However, no effect on end consumers

d.  unbranded diesel @ 4.60 / Lt instead of Advalorem. However, no effect on end consumers

e.  NCCD on cellular phones imposed

f.  NCCD on polyester yarn withdrawn

 

Customs: 

 

• Peak customs duty rate on non-agricultural items remains unchanged
• Customs Duty on steel melting and aluminum scrap has been reduced from 5per cent to nil
• Customs duty on specified life saving drugs and bulk drugs reduced from 10 per cent to 5 per cent. In addition these items will also get a full CVD exemption.
• Customs duty on Phosphoric acid reduced to 5 per cent
• Customs duty on bactofagus reduced from 7.5 per cent to nil
• Full Customs duty exemption on specified parts of set top boxes and raw material used in IT / Electronic Hardware industry
• Customs Duty on convergence products reduced from 10 per cent to 5 per cent
• Customs duty on sulphur reduced from 5 per cent to 2 per cent
• Customs duty exemption on Naptha for manufacturing polymers has been withdrawn. However, Customs Duty on Naptha used for manufacture of fertilized would continue to be exempt.
• Customs duty on polished cubic zirconia and rough coral reduced from 10 per cent to 5 per cent and full customs duty exemption on rough cubic zirconia
• Customs duty on vitamin pre-mixes and mineral mixtures used in manufacture of cattle and poultry feeds reduced from 30 per cent to 20 per cent.

   

Service Tax:

 

 

Addtional- Note in VPC on loan waiver and Inflation 

 

References:

 

1. Debate in the Parliament on 16th April 2008 on the issue of price rise, including the reply of the Hon Minister- Sharad Pawar http://164.100.24.209/newls/textofdebatedetail.aspx?sdate=04/16/2008

2. http://freemanstrikes.blogspot.com/2008/03/analysis-of-union-budget-2008-09.htm

3. http://www.laws4india.com/indiantaxlaws/budget2008/foreword.asp

• Rate of service tax remain unchanged

• Threshold limit, providing service tax exemption to small service providers, increased from Rs 8 lakhs per year to Rs 10 lakhs per year.

• Service tax has been imposed on the following services, to be effective from a date to be notified after the enactment of the Finance Bill, 2007:

a.  Asset Management Services provided under ULIP

b.  Service provided by Stock /Commodity Exchanges and Clearing Houses

c.  Right to use goods, in case where VAT is not payable

d.  Information technology software services