MAJOR BUDGET HIGHLIGHTS FOR THE FINANCIAL YEAR  2006-2007 CONCERNING THE INDUSTRY AND GENERAL INVESTORS

DIRECT TAXES

• No changes in rates of personal income tax or corporate income tax

• No new taxes proposed

• The one-by-six scheme obliging certain categories of persons to file income tax returns abolished

• Bank Cash Transaction Tax (BCTT) to continue till the Annual Information Returns (Air) system captures all significant financial activities

• FBT valuation reduced to 5% from 20% on tour and travel, hospitality and hotel boarding and lodging

• Minimum Alternate Tax (MAT) rate increased from 7.5% to 10%

• An increase of 25% on Securities Transaction Tax (STT)

• Fixed deposits in scheduled banks for a term of 5 years to be included in Section 80C of the Income Tax Act

• FM takes power to issue of PAN suo motu and to direct persons to apply for PAN

• Exemptions under Section 10 (23G) of the Income Tax Act removed

• Benefit of Section 54EC of the Income tax Act withdrawn with its scope restricted to only two institutions -NHAI and REC

• Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Banks (PCARBD) remain exempted from tax under Section 80P of the Income Tax Act. Other cooperative banks excluded from the scope of this Section

• Ceiling of Rs. 10,000 on contribution to pension funds under Section 80CCC of the Income Tax Act for income tax concession removed

CUSTOM DUTY

• Peak rate of customs duty on non- agricultural products slashed from 15.5% to 12.5%

• Duty on alloy steel and primary and secondary non-ferrous metals reduced from10% to 7.5%

• Duty on steel melting raised to 5%

• Duty on mineral products reduced to 5%; in some cases down to 2%. Cement, marble, granite and asbestos exempted

• Ad valorem duty on textile fabrics and garments reduced to 12.5% from 15%

• Refractories and its allied material to have 7.5% duty

• Duty on ores and concentrates reduced to 2% from 5%

• Duty on basic and organic chemicals reduced to 10% from 15%; that on basic cyclic and acyclic hydrocarbons and their derivatives reduced to 5%; and on catalyst to 7.5% from10%

• Duty on bulk plastics like PVC, LPDE an PP down to 5% from10% and for the raw materials on plastics like styrene, EDC and VCM down to 2%. Naptha for plastics to have nil duty

• Drugs for cancer and AIDS to have 5% duty

• Duty on packaging machines reduced to 5% from 10%

• Special Addition Duty (SAD) extended on imported items at 4% and jewellery at 1%

• Customs duty in India to be aligned with amendments approved by the Custom Corporation Council of World Customs Organisation w.e.f. January 1, 2007

EXCISE

• Duty on aerated drinks and small cars of less than 1200cc petrol and 1500c diesel reduced to 16%

• Excise duty on all man-made fibre yarn and filament yarn cut from 16% to 8%

• Import duty on raw material like DMT, PTA and MEG also reduced to 10%

• 8% excise duty imposed on packaged software sold over the counter

• Duty on ready to have packaged foods and instant food mixes reduced 8%

• Cigarettes to have 5% higher duty

• Duty on compact fluorescent lamps cut from 16% to 8%

• Glassware to have 16% duty, on par with ceramicware and plasticware

• Specified printing, writing and packing paper to have reduced duty of 12%

SERVICE TAX

• Service tax rate raised from 10% to 12%

• Service tax net widened. New services to attract tax are:

  • ATM operation, maintenance and management

  • Services of Registrars to an issue

  • Share transfer agents and bankers to an issue

  • Sale of space or time, other than in the print media, for advertisements

  • Sponsorship of events other than sports, by companies

  • International air travel, barring economy class passengers

  • Container services on rail, excluding railway freight

  • Business services

  • Auctioneering unless carried out by the court or the Central Government

  • Recovery agents

  • Card payment related services

  • Ship management services

  • Travel on cruise ships

  • Public relation management

  • Internet Telephony Service

• For leasing and hire purchase industry, interest and installments of the principal amount to be rebated in calculating value of services

• Goods and Service Tax to be introduced by April 1, 2010.

CAPITAL MARKET

• The limit of FII investment in Government securities has been increased from $ 1.75 billion to $ 2billion and the limit on FII investment in corporate debt from $ 0.5 billion to $1.5 billion

• Ceiling on aggregate investment by mutual funds in overseas raised from$ 1 billion to $ 2 billion and the requirement of 10% reciprocal shareholding removed

• A number of qualified Indian mutual funds allowed to invest, cumulatively upto $ 1 billion, in overseas exchange traded funds

• An investor protection fund set up under the aegis of SEBI, funded by fines and penalties recovered by SEBI

BANKING

• Special securities unwinded through conversion of these non-tradable special securities into tradable, SLR Government of India dated securities

• A comprehensive Bill on insurance to be introduced in 2006-07

PETROLEUM PRODUCTS

• Cess on domestic petroleum crude to be raised from Rs.1800 to Rs 2500 per tonne

• All LPG stoves to have concessional duty rate of 8%

• Duty unified at 5% on natural gas including propane and butane

• Petroleum products exempted from Special Additional Duty (SAD)

• Transportation of petroleum products through pipeline to be categorized as projects imports

• A Task Force set up to facilitate the development of large Petroleum, Chemicals and Petrochemicals Investment Regions

INFORMATION TECHNOLOGY

• Duty of 12% re-imposed on computers

• Packaged software other than downloaded software to have a excise duty of 8%

• Excise duty on MP3 and MPEG4 players reduced to 8% from 16%

INFRASTRUCTURE

• Budgetary Allocation for Rural Infrastructure Development Fund has been stepped up to Rs 10,000 crores in 2006-07

• Government to provide equity support of Rs.169.01 billion and loans of Rs. 27.89 billion to Central Public Sector Enterprises including Railways

TELECOMMUNICATION

• Rs. 1,500 to be provided by the Government from the Universal Services Obligation Fund to the telecommunication sector in 2006-07

POWER

• Section 80-1A of the Income Tax Act benefit extended till 31-3-2010 for power sector

• Government to provide Rs. 597 crore next year for non-conventional energy sources

LEATHER AND FOOTWEAR INDUSTRY

• Duty on footwear priced between Rs. 250 and Rs.700 reduced to 8% from 16%

FOOD PROCESSING INDUSTRY

• Food processing industry recognised as a priority sector for bank credit

• NABARD to open a separate window with a corpus of Rs. 1,000 crores for refinancing loans to the sector, especially for agro-processing infrastructure and market development