The Central government on Tuesday announced a Rs 30,000-crore boost to the slowing down economy by cutting excise duty and service tax by two per cent each and extending a four per cent reduction in excise duty, provided in the first stimulus package, beyond this fiscal-end.
The Central government on Tuesday announced a Rs 30,000-crore boost to the slowing down economy by cutting excise duty and service tax by two per cent each and extending a four per cent reduction in excise duty, provided in the first stimulus package, beyond this fiscal-end.
Finance Minister Pranab Mukherjee, who refrained from tinkering with the tax rates while tabling the interim Budget, also announced cut in excise duty on bulk cement by two per cent or Rs 60 per metric ton, whichever is higher.
Mukherjee also extended the flexibility to states to deviate from fiscal consolidation targets by 0.5 per cent beyond March 31, 2009 to boost infrastructure and enable them to generate more employment.
"...it has now been decided to reduce the general rate of central excise duty from 10 per cent to 8 per cent," Mukherjee said in his reply to the debate on the Budget while announcing extension of four per cent cut in excise duty provided in the stimulus package beyond March 31, 2009.
This means that the government has since the first stimulus package effected six per cent cut in excise duty. Besides, Mukherjee also announced a two per cent cut in service tax to bridge the difference between excise duty and service tax to restore confidence in the service sector.
The Finance Minister said it is another stimulus, and revenue loss due to the measures announced by him would be about Rs 30,000 crore.
Later, the Lok Sabha passed the interim Budget with a voice vote. Coming out of the Lok Sabha, the Finance Minister said it (measures announced by him) would have some revenue impact.
In his reply to the debate, Mukherjee attributed his decision to cut the service tax rate by two per cent to restoration of business confidence in the service sector.
"It is also our objective that dispersal between the cenvat rate and service tax rate is reduced to move to the stated goal of uniform goods and services tax," he said.
On bulk cement, he said the central excise duty is being reduced to 8 per cent or Rs 230 per metric ton, whichever higher from the current 10 per cent or Rs 290 per MT. He also extended exemption from customs duty given to naphtha imported for power generation beyond this fiscal-end.
To enable states to give their own stimulus, the government also extended a flexibility given to them to deviate from their fiscal consolidation targets by 0.5 per cent in the next fiscal.
This arrangement could be further reviewed, if necessary, Mukherjee said while pointing out that states have about Rs 91,000 crore of cash surplus. Mukherjee also promised to remove anomaly in calculating profits between those having units in SEZs as well as in domestic tariff area and those having units only in SEZs at the time of regular Budget.
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