BUDGET ESTIMATE 2009 - 2010

Budget Estimates provide for a total expenditure of Rs.10,20,838 crore consisting of Rs.6,95,689 crore under Non-plan and Rs.3,25,149 crore under Plan registering an increase of 37 per cent in Non-plan expenditure and 34 per cent in Plan expenditure over B.E. 2008-09.

Total expenditure in B.E. 2009-10 increased by 36 per cent over B.E. 2008-09.

Increase in Non-plan expenditure is mainly due to implementation of Sixth Central Pay Commission recommendations, increased food subsidy and higher interest payment arising out of larger fiscal deficit in 2008-09.

Interest payments estimated at Rs.2,25,511 crore constituting about 36 % of Non-plan revenue expenditure in B.E. 2009-10.

Subsidies up from Rs.71,431 crore to Rs.1,11,276 crore.

Outlay for Defence up from Rs.1,05,600 crore in 2008-09 to Rs.1,41,703 crore.

Gross Budgetary Support for Annual Plan 2009-10 enhanced by Rs.40,000 crore.

State Governments to be permitted to borrow additional 0.5 % of their GSDP by relaxing the fiscal deficit target under FRBM from 3.5% to 4 % of their GSDP. This will enable the States to borrow Rs.21,000 crore additionally.

Gross tax receipts budgeted at Rs.6,41,079 crore compared to Rs.6,87,715 crore in B.E. 2008-09.

Non-tax revenue receipts estimated at Rs.1,40,279 crore compared to Rs.95,785 crore in B.E. 2008-09.

Revenue deficit projected at 4.8 % of GDP in B.E. 2009-10 compared to 1 % in B.E. 2008-09 and 4.6 % as per provisional accounts of 2008-09.

Fiscal deficit as a percentage of GDP is projected at 6.8 % compared to 2.5 % in B.E. 2008-09 and 6.2 % as per provisional accounts 2008-09.

TAX PROPOSALS

Setting up of a Centralized Processing Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns of Direct Taxes filed in entire Karnataka, will be processed.

GDP ratio has increased to 11.5 % in 2008-09 from a low of 9.2 % in 2003-04. Share of direct taxes in the Centre’s tax revenues has increased to 56 % in 2008-09 from 41 % in 2003-04, reflecting sharp improvement in equity of our tax system.

Goods and Services Tax (GST) with effect from 1st April, 2010.

The Authorities for Advance Rulings on Direct and Indirect Taxes to be merged by amending the relevant Acts.

Agreement has been reached on the basic structure of GST in keeping with the principles of fiscal federalism enshrined in the Constitution. 

Direct Taxes

No changes made in the Corporate Tax rates.

Exemption limit in personal income tax raised by Rs.1,50,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens; by Rs.1,00,000 from Rs.1.80 lakh to Rs.1.90 lakh for women tax payers; and by Rs.1,00,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers.

Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.

10% surcharge on personal income tax goes.

Sun-set clauses for deduction of export profits for one more year i.e. for the financial year 2010-11.

Fringe Benefit Tax (FBT) to be abolished.

Scope of provisions relating to weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses being extended except for a small negative list.

Businesses to be incentivised by providing investment linked tax exemptions rather than profit linked exemptions. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments to be fully allowable as deduction.

Minimum Alternate Tax (MAT) to be increased to 15 % of book profits from 10 per cent. 

New Pension System (NPS) to continue to be subjected to the Exempt-Exempt- Taxed (EET) method of tax treatment of savings. Income of the NPS Trust to be exempted from income tax and any dividend paid to this Trust from Dividend Distribution Tax. All purchase and sale of equity shares and derivatives by the NPS Trust also to be exempt from the Securities Transaction Tax. Self employed persons to be enabled to participate in the NPS and to avail of the tax benefits available thereto.

Alternative dispute resolution mechanism to be created within the Income Tax Department for the resolution of transfer pricing disputes. Central Board of Direct Taxes (CBDT) to be empowered to formulate ‘safe harbor’ rules to reduce the impact of judgmental errors in determining transfer price in international transactions.

Commodity Transaction Tax (CTT) to be abolished.

Donations to electoral trusts to be allowed as a 100 % deduction in the computation of the income of the donor.

80E benefit for interest on loan for higher education to cover all specified fields, including vocational studies.

Anonymous donations received by charitable organisations to the extent of 5 % of their total income or a sum of Rs.1 lakh, whichever is higher, not to be taxed.

Scope of presumptive taxation to be extended to all small businesses with a turnover upto Rs. 40 lakh. This new scheme to come into effect from the financial year 2010-11.

Tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, to be extended to natural gas. 

Indirect Taxes

Proposals on indirect taxes to seek to achieve stable framework by maintaining the overall rate structure for customs and central excise duties as well as service tax.

Customs duties

5% of Customs duty on Set Top Box for television broadcasting.

Customs duty on LCD Panels for manufacture of LCD televisions to be reduced from 10% to 5%.

Full exemption from 4% special CVD on parts for manufacture of mobile phones and accessories to be reintroduced for one year.

List of specified raw materials/inputs imported by manufacturer-exporters of sports goods which are exempt from customs duty, subject to specified conditions, to be expanded by including five additional items.

List of specified raw materials and equipment imported by manufacturer-exporters of leather goods, textile products and footwear industry which are fully exempt from customs duty, subject to specified conditions, to be expanded.

Customs duty on unworked corals to be reduced from 5% to Nil.

Customs duty on 10 specified life saving drugs/vaccine and their bulk drugs to be reduced from 10% to 5% with Nil CVD (by way of excise duty exemption).

Customs duty on specified heart devices, namely artificial heart and PDA/ASD occlusion device, to be reduced from 7.5% to 5% with Nil CVD (by way of excise duty exemption).

Customs duty on permanent magnets for PM synchronous generator above 500 KW used in wind operated electricity generators to be reduced from 7.5% to 5%.

Customs duty on bio-diesel to be reduced from 7.5% to 2.5%.

Concessional customs duty of 5% on specified machinery for tea, coffee and rubber plantations to be reintroduced for one year, upto 06.07.2010.

Customs duty on ‘mechanical harvester’ for coffee plantation to be reduced from 7.5% to 5%. CVD on such harvesters has also been reduced from 8% to nil, by way of excise duty exemption.

Customs duty on serially numbered gold bars (other than tola bars) and gold coins to be increased from Rs.100 per 10 gram to Rs.200 per 10 gram. Customs duty on other forms of gold to be increased from Rs.250 per 10 gram to Rs.500 per 10 gram. Customs duty on silver to be increased from Rs.500 per Kg. to Rs.1000 per Kg. 

Customs duty on cotton waste to be reduced from 15% to 10%.

Customs duty on rock phosphate to be reduced from 5% to 2%

CVD exemption on Aerial Passenger Ropeway Projects to be withdrawn.

Customs duty exemption on concrete batching plants of capacity 50 cum per hour or more to be withdrawn. Such plants will now attract customs duty of 7.5%.

On packaged or canned software, CVD exemption to be provided on the portion of the value which represents the consideration for transfer of the right to use such software, subject to specified conditions.

Customs duty on inflatable rafts, snow-skis, water skis, surf-boats, sail-boards and other water sports equipment to be fully exempted.

Central excise duties

Excise duty rate on items currently attracting 4% to be raised to 8% with following
major exceptions:

• Specified food items including biscuits, sharbats, cakes and pastries

• Drugs and pharmaceutical products falling under Chapter 30

• Medical equipment

• Certain varieties of paper, paperboard and articles thereof

• Paraxylene

• Power driven pumps for handling water

• Footwear of RSP exceeding Rs.250 but not exceeding Rs.750 per pair

• Pressure cookers

• Vacuum and gas filled bulbs of RSP not exceeding Rs.20 per bulb

• Compact Fluorescent Lamps

• Cars for physically handicapped

Specific component of excise duty applicable to large cars/utility vehicles of engine capacity 2000 cc and above to be reduced from Rs. 20,000/- per vehicle to Rs.15,000 per vehicle.

Excise duty on petrol driven trucks/lorries to be reduced from 20% to 8%. Excise duty on chassis of such trucks/lorries to be reduced from ‘20% + Rs.10000’ to ‘8% + Rs.10000’.

Excise duty on Special Boiling Point spirits to be reduced to 14%.

Excise duty on naphtha to be reduced to 14%.

Duty paid High Speed Diesel blended with upto 20% bio-diesel to be fully exempted from excise duties.The ad valorem component of excise duty of 6% on petrol intended for sale with a brand name to be converted into a specific rate. Consequently, such petrol would now attract total excise duty of Rs.14.50 per litre instead of ‘6% + Rs.13 per litre’.

The ad valorem component of excise duty of 6% on diesel intended for sale with a brand name to be converted into a specific rate. Consequently, such diesel would now attract total excise duty of Rs.4.75 per litre instead of ‘6% + Rs.3.25 per litre’.

Excise duty on manmade fibre and yarn to be increased from 4% to 8%. ! Excise duty on PTA and DMT to be increased from 4% to 8%.

Excise duty on polyester chips to be increased from 4% to 8%.

Excise duty on acrylonitrile to be increased from 4% to 8%

The scheme of optional excise duty of 4% for pure cotton to be restored.

Excise duty for man-made and natural fibres other than pure cotton, beyond the fibre and yarn stage, to be increased from 4% to 8% under the existing optional scheme.

An optional excise duty exemption to be provided to tops of manmade fibre manufactured from duty paid tow at par with tops manufactured from duty paid staple fibre.

Suitable adjustments to be made in the rates of duty applicable to DTA clearances of textile goods made by Export Oriented Units using indigenous raw materials/ inputs for manufacture of such goods.

Full exemption from excise duty to be provided on goods of Chapter 68 of Central Excise Tariff manufactured at the site of construction for use in construction work at such site.

Excise duty exemption on ‘recorded smart cards’ and ‘recorded proximity cards and tags’ to be made optional. Manufacturers have the option to pay the applicable excise duty and avail the credit of duty paid on inputs.

EVA compound manufactured on job work for further use in manufacture of footwear to be exempted from excise duty.

Benefit of SSI exemption scheme to be extended to printed laminated rolls bearing the brand name of others by excluding this item from the purview of the brand name restriction.

On packaged or canned software, excise duty exemption to be provided on the portion of the value which represents the consideration for transfer of the right to use such software, subject to specified conditions.

Excise duty on branded articles of jewellery to be reduced from 2% to Nil.

Service tax

Service Tax to be imposed on the following services:

• Service provided in relation to transport of goods by rail.

• Service provided in relation to transport of coastal cargo; and goods through inland water including National Waterways.

• Advice, consultancy or technical assistance provided in the field of law (this tax would not be applicable in case the service provider or service receiver is an individual).

• Cosmetic and plastic surgery service.

Exemption from service tax being provided to inter-State or intra-State transportation of passengers in a vehicle bearing ‘Contract Carriage Permit’ with specified conditions.

Exemption from service tax (leviable under Banking and other financial services or under Foreign exchange broking service) being provided to inter-bank purchase and sale of foreign currency between scheduled banks.

Two taxable services, namely, ‘Transport of goods through road’ and ‘Commission paid to foreign agents’ to be exempted from the levy of service tax, if the exporter is liable to pay service tax on reverse charge basis. However, present cap of 10% on commission agency charges is retained. Thus there would be no need for the exporter to first pay the tax and later claim refund in respect of these services.

For other services received by exporters, service tax exemption to be operated through the existing refund mechanism based on self-certification of the documents where such refund is below 0.25 % of FOB value, and certification of documents by a Chartered Accountant for value of refund exceeding the above limit.

Export Promotion Councils and the Federation of Indian Export Organizations (FIEO) to be exempt from service tax on the membership and other fees collected by them till 31st March 2010.

Tax proposals on direct taxes to be revenue neutral. On indirect taxes, estimated net gain to be Rs.2,000 crore for a full year.

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