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Reliefs on textiles, edible oils

By Alok Mukherjee

NEW DELHI APRIL 30. The Union Finance Minister, Jaswant Singh, managed to successfully steer the Finance Bill 2003 through the Lok Sabha today but drew flak mostly from members of the BJP and some of the allied parties who seemed clearly disappointed with the concessions announced by him.

Mr. Singh, in fact, held out few fiscal concessions which would be revenue-neutral with no additional impact but yielded to most of the political demands of the members. For instance, he announced that the value added tax (VAT) would not be introduced in the country till all the States were in a position to implement it and also assured members that there was no proposal to impose income tax on agriculture. However, the concessions regarding the textile sector drew flak from BJP members such as Madan Lal Khurana who felt he had not done enough for the powerloom weavers and readymade garment manufacturers. Mr. Khurana demanded a higher cut-off limit for garment exporters, which was firmly turned down by the Finance Minister. Mr. Khurana left the House even before voting on the bill could be completed.

Some Shiv Sena members, in particular Prashant Pranjpye, continued to heckle the Finance Minister for not raising the monetary amount under the MP's Local Area Development (MPLAD) scheme. Mr. Pranjpye actually threatened a hunger strike and sat in the well of the House for sometime till other members and the Parliamentary Affairs Minister, Sushma Swaraj, talked him out of it. But the dissatisfaction continued with some other Shiv Sena members threatening a division of the House on some of the proposals of the Finance Bill during the voting stage. They were finally prevailed upon by Ms. Swaraj who got them an audience with the Prime Minister after the House was adjourned.

For the middle class, the only benefit pertained to tax exemption in respect of insurance policies whose premium exceeded 20 per cent of the sum assured in any of the years. In his budget speech, the Minister had withdrawn the exemption since he felt such policies were, in essence, more in the nature of instruments of investments and not much for covering of life risk. Mr. Singh has now done away with any retrospective application of the budget proposal and henceforth, income earned on policies taken before April 1, 2003, will continue to enjoy tax exemption.

The Minister amended another of his budget proposals pertaining to exemption from long-term capital gains on equity shares. As per the amendment, the exemption will be limited to equity shares appearing in the list of BSE 500 as of March 1, 2003, and where transactions of purchase and sale are on a recognised stock exchange in India. This exemption will also be extended to equity shares allotted through a public issue on or after March 1, 2003 and listed in recognised stock exchanges before March 1, 2004.

For political parties, Mr. Singh exempted from income tax the income from capital gains as is the case with income from house property, other sources and donations for such parties.

He also announced that in case of compensation paid to accident victims under the Motor Vehicles Act, there would be no tax deduction at source where the interest awarded on compensation did not exceed Rs. 50,000. Certain benefits available to the tea industry and extended to the coffee industry were also extended to the rubber industry.

The Minister yielded on his budget proposal for eight per cent ad valorem excise duty on branded refined edible oils and vanaspati packed in sealed containers for retain sale and imposed a specific excise duty rate of Re. 1 a kg on refined edible oils and Rs 1.25 a kg on vanaspati. These new rates would be applicable to products both branded and otherwise.

Simultaneously, he lowered the customs duty on RBD palm oil from 85 per cent to 70 per cent and also exempted refined palm oil from Special Additional Duty (SAD) of about four per cent.

This lowering of the import duty on RBD palm oil raised howls of protest from members from the southern States, cutting across party lines, and matters came under control only after the Minister explained that refined palm oil accounted for only three per cent of such imports, while crude palm oil accounted for 93 per cent of the imports. Still, with members unsatisfied, he promised to revisit the issue in case domestic producers of coconut or groundnut oil were adversely affected because of the cheaper palm oil imports.

Mr. Singh said it was possible that a number of powerloom owners were not filing income tax; nor did they have proper books of accounts. Still, in case they wanted to declare their stocks for availing Cenvat (Central VAT) benefits, they could declare their stocks not exceeding Rs. 10,000 a powerloom and no questions would be asked about the past. There would be no retrospective application or consequences.

The Minister also fully exempted from excise duty unprocessed fabrics up to the first clearance of Rs. 20 lakhs, provided they were woven by powerloom units with an annual turnover below Rs. 25 lakhs. He also proposed full excise duty exemption on unbranded woven and knitted readymade garments up to their first clearance of Rs. 25 lakhs provided the annual turnover did not exceed Rs. 30 lakhs.

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