What does Indian industry expect
from the Union Budget? As part of their annual exercise,
this year also the major chambers of commerce and industry
have submitted their memoranda to the finance minister.
The wish list, as usual, includes sections and sub-sections
relating to IT, excise and customs duties, sales tax,
treatment of depreciation and so on. However, we intend
to focus on the impact of the budgetary provisions of
the last two years and expectations from the forthcoming
budget on those sectors that are relevant to the Tata
Group. An illustrative list is presented below:
| Sector |
Budget
1999-00 and 2000-01 |
| |
Specific
measures |
Impact
on the sector |
Expectations
from Budget 2001-2002 |
| Steel |
Customs Duty:
- CRC:
up from 35 % to 38.5 %
- HRC:
down from 30 % to 27.5 %
- Ferro alloys:
up from 25 % to 27.5 %
Excise Duty:
- All steel items:
up from 15 % to 16 %
Direct taxes:
- MAT:
down from 10.5 % to 7.5 %
-SAD on steel traders: 4 %
- Dividend tax:
up from 11 % to 22 %
-Export profits upto 20% to be progressively
taxed up to 100%
-Surcharge on corportae tax: 10%
|
Increase
in production of
CRC and finished steel
Rise in exports |
Duty
on the import of seconds defective steel to be pegged
at 20%
A likely exemption for steel construction equipent
(for major power prejects) from excise duty of 18%
Differential excise
duty structure to encourage steel consumption i
housing and infrastructure
|
| Auto |
Customs Duty:
- Peak rate: down from
40% to 35%
- Availing of CVD
credit for project imports: 100% modvat
Excise Duty:
- On CVs: up from 15%
to 16%
- Aluminium and steel
inputs:
up from 15% to 16%
- Freight cost up by 4%
- CENVAT on tyres:
down from 30% to 16%
- On MUV's: up from 30%
32%
- Total ED on passenger
cars: up to 40% (CENVAT: 16% & SED: 24%)
Direct taxes:
similar to steel ( except SAD)
|
Falling
sale of CVs
Growth in exports in MUV segment
Loss of immense cash
flows in the short run due to the imposition of
non-modvatable SED on passenger cars
|
CVs
should be declare as 'Essential goods' and excise
duty to be reduced from 16% to 8
The tyre industry wants import duty on tyre raw
materials to be 20% lower than that on the end product.
In addition, an imort duty of $50 per tyre to be
imposed on used and old tyres
ED on passenger cars
to fall within the 32%-35% range
|
| IT |
Customs duty:
- On computer parts: down
from 10% to 5%
- Peak rate: down 35%
- on a number of
hardware items
|
Impressive
growth in PC sales.
E-commerce yet to pick up |
Excise
and CVD on hardware to be halved.Surcharge on hardware
and SAD to be abolished
Five-year tax holiday
for e-commerce.
Software development and services to be kept outside
the purview of service tax.
|
Chemical
and
Fertiliser |
- Customs duty on
urea: up from 0 to 5%
- Excise duty on
soda ash: down 2%
Ex-factory price
of urea increased from Rs4000 per tonne to Rs
4,600
- Duty: up from
nil to 5% ( basic) and 10% ( CVD) on import
of plant and machinery for fertilisers.
|
Fertiliser
production has witnessed a roller-coaster trend.
Future growth will depend on pricing policy, subsidy
levels and competition in the face of QR removal
Chemical exports on a rise |
Customs
duty on fuel oils, catalyst and LSHS to be abolished.
Excise duty on HSD to be modvatable.
Creation of modernisation fund for the chemical
industry.
Current import tariif of 5.5% on fertilisres to
be raised |
| Power |
- MAT: down from 10.5%
to 7.5%
- Plan outlay for the
central PSUs in the power sector up to Rs 9,194
crore
Scheme for securisation
of dues of SEBs and linking it to the reforms
in these boards.
Infrastructure status accorded to T& D activities
|
The
private sector has commissioned only 6,000 MWs of
the targeted 10,000 MWs
The demand - supply gap in power generation is
hovering between 18% to 20%
|
Customs
duty on import of captive power plants of 5 MW or
more should be reduced.
Captive/ co-generation projects should be brought
under the purview of the catergory "power generation
projects" and given exemption from SAd of 4%
Extended no-tax benefit date for new investment
in T&D from 2003 to 2005.
|
