Central Budget 2011-12

8/6/2019 Central Budget 2011-12

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Principles of Sound Budgeting

Budgeting should be on Annual Basis Estimates should be on departmental Basis

Budget should be a balance done

Estimates should be on a cash basis

One budget for all financial transactions

Budgeting should be gross and not net Rule of Lapse

Revenue and capital portions should be separated

Form of estimations should correspond to form of accounts

Forms or Systems

Line-item Budegting

Performance Budgeting

Programme Budegting

Zero Based Budgeting Sunset Legislation

Top-Down Budgeting


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Agencies Related to Central Budget

Finance Ministry

Administrative Ministries

Planning Commission

Comptroller and Auditor General of India

Stages or Process

Prepartation of Estimates by the Drawing and DistributionOfficers

Scrutiny and Consolidation of Estimates by the Departmentsand Ministries

Scrutiny by the Finance Ministry Consolidation by the Finance Ministry

Approval by the Cabinet

Enactment Of budget

Meaning:- the passage or approval of the budget by theparliament and ratification by the President.


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Stages of Enactment

Presentation of Budget

General Discussion

Scrutiny by Department Committees

Voting on demands for grants

Passing of Approriation Bill

Passing of Finance Bill

Biblography

Public Administration (5th Edition) by M LaxmikanthPublished by TATA McGRAW-HILL


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I. Overview of the Economy

II. Sustaining Growth

Tax Reforms

GST (goods and services tax) and direct tax code (direct tax code) shall inintroduced, which will result into moderation of rates, simplification of laws andbetter compliance.

Important to mention that DTC was introduced in parliament in August, 2010;which shall be finalised and it will be enforced from April 1, 2012.

Also due conversations are on table with several states for proper implementation of GST. Due care is also taken on drafting of model legislation for central and state GST.

National Securities Depository Limited (NSDL) has been selected as technologypartner for incubating the National Information Utility that will establish andoperate the IT backbone for GST. By June 2011, NSDL will set up a Pilot portal incollaboration with eleven States prior to its roll out across the country.

Subsidies

During 2010-11, Nutrient Based Subsidy (NBS) policy was successfulimplemented for all fertilizers except urea. Also due talk are on table for coveringurea under NBS.

Till date government is providing subsidies on fuels and food grains for its easyaccess to common man, but going forward a proposal has been made for providing cash subsidies for people living below poverty line.

Already a task force has been formed under chairmanship of Mr. NandanNilekani for setting up of formalities for direct transfer of above said cashsubsidies.

People's ownership of PSUs

In last financial year total 6 public issues of central public sector undertakingstook place which in attracted about 50 lakh retail investors.

In last financial year center has raised about 22,144 crore where as target wasof 40,000 crore. This is mainly because higher receipt of non-tax revenues.


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But again in this financial year Government is bound to raise about 40,000crore. But that at the same time due care shall be taken that governmentmaintains its share of 51%.

Investing Environment

Foreign Direct Investment

In order to have clarity in process, single window clearance shall be applicable andagain after every 6 months said policy shall be reviewed.

Foreign Institutional Investors

Currently only FIIs and sub-account holders registered with SEBI and NRIs areallowed to invest directly in mutual fund schemes. But going further foreignindividuals who ful fill KYC norms shall also be allowed to invest directly in equityschemes approved by SEBI.

Financial Sector Legislative Initiatives

The financial sector reforms initiated during the early 1990s have borne good results for the Indian economy. The UPA Government is committed to take this process further.Accordingly, I propose to move the following legislations in the financial sector:

(i) Rhe Insurance Laws (Amendment) Bill, 2008;

(ii) The Life Insurance Corporation (Amendment) Bill, 2009;

(iii) The revised Pension Fund Regulatory and Development Authority Bill firstintroduced in 2005;

(iv) Banking Laws Amendment Bill, 2011;

(v) Bill on Factoring and Assignment of Receivables;

(vi) The State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2009; and

(vii) Bill to amend RDBFI Act 1993 and SARFAESI Act 2002.

RBI is planning to bring in some changes in issuing banking licenses to privateplayers better growth


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Micro Finance Institutions

A fund of 100 crore shall be made with SIDBI for empowerment of women andto promote their self help groups.

Further a fund with corpus of 500 crore shall be formed with name of Women'sSHG's Development Fund.

Micro Small and Medium Enterprises

As we know health of handloom co-operatives society are at worst, a proposalhas been made to provide 3,000 crore which in turn shall again be diverted tothese societies in installments which shall benefit about 15,000 handloom co-operative societies and 3,00,000 handloom weavers.

Housing Finance Sector

Existing policy is to give a discount of 1% on loan up to 10 lakhs with acondition of cost of house should not exceed 20 lakhs but a proposal has beenmade to raise same to 15 lakhs and 25 lakhs respectively.

Existing norms of priority sector lending is 20 lakhs but a proposal has beenmade to raise it to 25 lakhs in urban areas.

An electronic registration shall be active in place in case of registration of immovable properties and same shall under cover under SARFAESI Act, 2002.

Agriculture

Rashtriya Krishi Vikas Yojana (RKVY) for an early take off. The total allocation of RKVY is being increased from 6,755 crore in 2010-11 to 7,860 crore in 2011-12.

Bringing Green Revolution to Eastern Region

The Green Revolution in Eastern Region is waiting to happen. To realize thepotential of the region, last year's initiative will be continued in 2011-12 with afurther allocation of `400 crore. The program would target the improvement in therice based cropping system of Assam, West Bengal, Orissa, Bihar, Jharkhand,Eastern Uttar Pradesh and Chhattisgarh.

Integrated Development of 60,000 pulses villages in rained areas

With due initiation taken by government a record production 165 lakh tones isexpected as against 147 lakh tones.


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Further, a proposal has been made to allocate 300 crore to these villages for better productivity and for strengthening village linkages.

Promotion of oil palm

Our domestic production is about 50 % of our actual requirement, but with dueintervention of the government and good rain this year production of cotton seedswill be about 278 lakh tones as in comparison to 249 lakh tones. Further aproposal has been made for allocation of 300 crore to bring 60,000 hectaresunder oil palm plantation.

Initiative on Vegetable Clusters

Growing demand for vegetables has to be met by a robust increase inproductivity and market linkage. An efficient supply chain, to provide qualityvegetables at competitive prices will have to be established. Proposal to providean amount of 300 crore for implementation of vegetable initiative to set inmotion a virtuous cycle of higher production and incomes for the farmers. Tobegin with, this programme will be launched near major urban centers.

Nutri-cereals

Bajra, jowar, ragi and other millets are highly nutritious and are known to possessseveral medicinal properties. The availability and consumption of theseNutricereals is, however, low and has been steadily declining over recent years.A provision of 300 crore is being made to promote higher production of thesecereals, upgrade their processing technologies and create awareness regardingtheir health benefits.

Important to mention here is that all necessary allocations are made with number '3' as Mr.Pranab Mukherjee believes that 3 is his lucky number.

National Mission for Sustainable Agriculture

As we all know that with growth in population growth in production of food grainsis also necessary but deterioration in soil health due to removal of crop residuesand indiscriminate use of chemical fertilizers has resulted into downfall of qualityand also quantity.


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To address these issues, the Government proposes to promote organic farmingmethods, combining modern technology with traditional farming practices likegreen manuring, biological pest control and weed management.

Agriculture Credit

To get the best from their land, farmers need access to affordable credit. Bankshave been consistently meeting the targets set for agriculture credit flow in thepast few years. For the year 2011-12, the target of credit flow to the farmers from

3, 75,000 crore this year to 4, 75,000 crore in 2011-12. Banks have beenasked to step up direct lending for agriculture and credit to small and marginalfarmers.

Last year special interest subvention scheme was launched with rate of 5% for the small farmers who are involved in production of short term crop with condition

to repay loans in specified time but if timely payment is not made then alsospecial rate of 7% would be applicable. But this year special rate of 4% would beapplicable for those who pay on time.

Also, government would infuse 3,000 crore in NABARD which would increaseits paid capital of 5,000 crore.

Mega Food Parks

Despite growing production of vegetables and fruits, we can see that skyreaching prices of fruits An estimated 40 % of the fruit and vegetable productionin India goes waste due to lack of storage, cold chain and transportinfrastructure. To address these issues, the Eleventh Plan target for number of Mega Food Parks was set at 30. So far, 15 such parks have been sanctioned.During 2011-12, approval is being given to set up 15 more Mega Food Parks.

Storage Capacity and Cold Chains

Just in 2 years (from 2008 to 2010) the food grain stock in Central pool reached470 lakh metric tons, 2.7 times higher than 174 lakh metric tones on January 1,2007. So it is but obvious that problem would be of storage. So, process tocreate new storage capacity of 150 lakh metric tones through privateentrepreneurs and warehousing corporations has been fast tracked.

Investment in cold storage projects is now gaining momentum. During this year,24 cold storage projects with a capacity of 1.4 lakh metric tonnes have beensanctioned under National Horticulture Mission. In addition, 107 cold storage


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projects with a capacity of over 5 lakh metric tonnes have been approved by theNational Horticulture Board.

To attract investment in this sector, henceforth, capital investment in the creationof modern storage capacity will be eligible for viability gap funding scheme of the

Finance Ministry. It is also proposed to recognize cold chains and post-harveststorage as an infrastructure sub-sector.

Agriculture Produce Marketing Act

As we are aware that in recent past there has been huge surge in inflation invegetables and fruits. This has clearly showed weakness and serious flaws in our supply chains. The government regulated mandis sometimes prevent retailersfrom integrating their enterprises with the farmers. There is need for the StateGovernments to review and enforce a reformed Agriculture Produce Marketing

Act urgently.

Infrastructure and Industry

Infrastructure is critical for our development. For 2011-12, an allocation of over 2, 14,000 crore is being made for this sector, which is 23.3 % higher than currentyear. This amounts to 48.5 % of the Gross Budgetary Support to planexpenditure.

With concept of PPP we have achieved good and remarkable success; henceforth proposal is also kepAlsot forward for comprehensive policy that can be usedby the centre and state for further development.

Government established India Infrastructure Finance Company Limited (IIFCL) toprovide long term financial assistance to infrastructure projects. It was estimatedthat by end of March, 2011 it would disburse amount of 20,000 crore for infrastructure related investments further it is estimated that by March 31, 2012 itwould be disbursing amount of 25,000 crore.

In order to promote infrastructure projects, a proposal has been made for issuingtax-free bond of 30,000 crore by various Government undertaking in year 2011-12. This includes Indian Railway Finance Corporation 10,000 crore, NationalHighway Authority of India 10,000 crore, HUDCO 5,000 crore and Ports Rs,5,000.

National Manufacturing Policy


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For growth of manufacturing sector and to increase its share in GDP from16% to 25%, Government shall be introducing manufacturing policy verysoon.

Also important to mention that for better management and policyimplementation of policy 2 separate committees been formed and their recommendations shall be available in 3 months.

A committee of Group of Ministers has been set up for consideringEnvironment issues which also includes infrastructure and mining.

As we know that automobile industry is growth at huge pace with annualgrowth of about 30% and which is 2 nd promising industry in the world, aproposal has been made for formation of National Mission for Hybrid andElectric Vehicles will be launched in collaboration with all stakeholders, for providing clean and green transportation for the masses.

A funding of 15,260 modern low floor and semi-low floor buses under JNNURM, besides adding to passenger comfort, has transformed the urbantransport across India. In 2011-12, Delhi Metro Phase-III and Mumbai MetroLine III are proposed to be taken up. The ongoing Metro projects of Bengaluru, Kolkata and Chennai will be provided financial assistance for speedy implementation.

Investment in fertilizer sector is capital intensive and is considered high risk. Itis proposed to include capital investment in fertilizer production as aninfrastructure sub-sector.

Exports

The Task Force on Transactions Cost set up by the Department of Commerceto identify and suggest ways to achieve improvement in efficiency of our export processes, has completed its work. Twenty one suggestions made bythe Task Force have already been implemented. Action on remaining two willbe taken in next few months. This will mitigate transactions cost by about2,100 crore.

A revolutionary concept of self assessment of duty liabilities payable by theexporters and importers would be done by themselves when they would befiling their declarations in the EDI (Electronic Data Interchange) systems.Important to mention that a random assessment of such filing would be doneby department.

A new scheme and process shall be placed for the quick and easy refund onthe taxes paid on the services for export of goods.


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A new scheme of tax-free receipt of the services shall also be introduced for units in SEZs if such units are going to consume the services within the zoneand also to get their refunds in easier manner.

Mega clusters have large employment and export potential. Proposal toextend the Mega Cluster Scheme for development of leather products. Sevenmega leather clusters would be set up during the year 2011-12. Proposal toinclude Jodhpur for the development of a handicraft mega cluster.

Black Money

The generation and circulation of black money is an area of serious concern.To deal with this problem effectively, Government has put into operation afive-fold strategy which consists of Joining the global crusade against 'blackmoney'; Creating an appropriate legislative framework; Setting up institutionsfor dealing with illicit funds; Developing systems for implementation; andImparting skills to the manpower for effective action.

We secured Membership of the Financial Action Task Force (FATF) in Junelast year. This is an important initiative of G-20 for anti-money laundering. Wehave also joined the Task Force on Financial Integrity and EconomicDevelopment, Eurasian Group (EAG) and Global Forum on Transparency andExchange of Information for Tax Purposes.

During the year, we have concluded discussions for 11 Tax Information

Exchange Agreements (TIEAs) and 13 new Double Taxation AvoidanceAgreements (DTAAs) along with revision of provisions of 10 existing DTAAs.To effectively handle the increase in tax information exchange and transfer pricing issues, Foreign Tax Division of CBDT has been strengthened. Adedicated Cell for exchange of information is being set up to work on thisagenda.

The amendment in our Money Laundering Legislation in 2009 hassignificantly increased its scope and application. The number of casesregistered under this law has increased from 50 between 2005 to 2008 toover 1200 by January this year. The strength of the Enforcement Directoratehas been increased three-fold to deal effectively with the increased workload.

The Ministry of Finance has commissioned a study on unaccounted incomeand wealth held within and outside our country. It would suggest methods totax and repatriate this illicit money.


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Trafficking in narcotic drugs is also a contributor to the generation of blackmoney. To strengthen controls over prevention of trafficking and improve themanagement of narcotic drugs and psychotropic substances, Proposal toannounce a comprehensive national policy in the near future.

Bharat Nirman

The UPA Government's flagship programmes have been the principalinstrument for implementing its agenda for inclusive development. For theyear 2011-12, Bharat Nirman, which includes Pradhan Mantri Gram SadakYojna (PMGSY), Accelerated Irrigation Benefit Programme, Rajiv GandhiGrameen Vidyutikaran Yojna, Indira Awas Yojna, National Rural DrinkingWater Programme and Rural telephony have together been allocated58,000 crore. This is an increase of 10,000 crore from the current year. Aplan has been finalized to provide Rural Broadband Connectivity to all 2,50,000 Panchayats in the country in three years.

MGNREGA

In pursuance of my earlier budget announcement to provide a real wage of 100 per day, the Government has decided to index the wage rates notifiedunder the MGNREGA to the Consumer Price Index for Agricultural Labor. Theenhanced wage rates have been notified by the Ministry of RuralDevelopment on January 14, 2011. It has resulted in significant enhancementof wages for the beneficiaries across the country.

The Anganwadi workers and Anganwadi helpers are the backbone of Integrated Child Development Services Scheme. Also an increase of 100% inthe remuneration of Anganwadi workers from 1,500 per month to 3,000per month and for Anganwadi helpers from 750 per month to 1,500 per month. This will be effective from April 1, 2011. Around 22 lakh Anganwadiworkers and helpers will benefit from the increase.

Scheduled Castes and Tribal Sub-plan

In the Budget for 2011-12, for the first time, specific allocations are beingearmarked towards Scheduled Castes Sub-plan and Tribal Sub-plan. Thesewill be shown in the Budget of the relevant Ministries and Departments under separate minor heads of account. Further, Proposal had been made toincrease the Budget allocation for primitive tribal groups from 185 crore in2010-11 to 244 crore in 2011-12.

Education


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As we all know India is country of young people and in 2025 over 70% of Indians would of working age. So in order to increasing the percentage of our scholars in higher education and providing skill training is necessary. For education, Proposal for allocation of 52,057 crore, this is an increase of 24

% over the current year.

Sarva Shiksha Abhiyan

For 2011-12, Proposal of 21,000 crore has been made which is about 40%higher in comparison to years 15,000 allocated.

Empowerment flows from Education. While SC and ST had been given postmetric scholarships but lack has been seen in pre metric studies so in 2011-12 proposal has been to provide a scholarships to foresaid communitiesstudents studying in standard 9 th and 10 th.

National Knowledge Network

Approved in March 2010, the National Knowledge Network (NKN) will link1500 Institutes of Higher Learning and Research through an optical fiber backbone. During the current year, 190 Institutes will be connected to NKN.Since the core will be ready by March 2011, the connectivity to all 1500institutions will be provided by March 2012.

Innovations

To move beyond the formal R&D paradigm, a National Innovation Councilunder Shri Sam Pitroda has been set up to prepare a roadmap for innovationsin India.

The Government has been providing special grants to recognize excellence inuniversities and academic institutions. In the course of 2011-12, followingproposals has been made.

50 crore each to upcoming centers of Aligarh MuslimUniversity at Murshidabad in West Bengal and Malappuramin Kerala;Rs 100 crore as one-time grant to the Kerala Veterinary andAnimal Sciences University at Pookode, Kerala;

10 crore each for setting up Kolkata and Allahabad Centresof Mahatma Gandhi Antarrashtriya Hindi Vishwavidyalaya,Wardha;

200 crore as one time grant to IIT, Kharagpur 20 crore for Rajiv Gandhi National Institute of Youth

Development, Sriperumbudur, Tamil Nadu


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20 crore for IIM, Kolkata, to set up its Financial Researchand Trading Laboratory

200 crore for Maulana Azad Education Foundation10 crore for Centre for Development Economics and Ratan

Tata Library, Delhi School of Economics, Delhi; and

10 crore for Madras School of Economics.

Health

A Proposal also has been made for health, to step up the plan allocations in2011-12 by 20 % to 26,760 crore. The Rashtriya Swasthya Bima Yojana hasemerged as an effective instrument for providing a basic health cover to poor andmarginal workers. It is now being extended to MGNREGA beneficiaries, beediworkers and others. In 2011-12, a proposal has been made to further extend thisscheme to cover unorganized sector workers in hazardous mining andassociated industries like slate and slate pencil, dolomite, mica and asbestos etc.

Financial Inclusion

Last year our FM had advised Banks to provide banking facilities to habitationshaving a population of over 2000 by March, 2012. The Banks have identifiedabout 73,000 such habitations for providing banking facilities using appropriatetechnologies. A multi-media campaign, Swabhimaan, has been launched toinform, educate and motivate people to open bank accounts. During this year,banks will cover 20,000 villages. Remaining will be covered during 2011-12.

Unorganized sector

Under the on-going Indira Gandhi National Old Age Pension Scheme for BPLbeneficiaries, the eligibility for pension is proposed to be reduced from 65 yearsat present to 60 years. Further, for those who are 80 years and above, thepension amount is being raised from 200 at present to 500 per month.

Environment and Climate Change

Forests

Protection and regeneration of forests has great ecological, economic and socialvalue. Our Government has launched an ambitious ten-year Green India mission.Proposal has been to allocate 200 crore from the National Clean Energy Fundto begin its implementation in 2011-12.

Environmental Management Environmental pollution has emerged as a serious public health concern across

the country. Proposal has been to allocate 200 crore from the National Clean


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Energy Fund as Centre's contribution in 2011-12 for launching environmentalremediation programmes.

Cleaning of Rivers and Lakes A number of projects under the National Ganga River Basin Authority have been

approved in 2010-11. This momentum will be further stepped up. There are manyrivers and lakes of cultural and historical significance that need to be cleaned. Inthe course of the year 2011-12, Proposal has been made to a special allocationof 200 crore for the clean-up of some important lakes and rivers other than theGanga.

Census 2011

The 15th Census in the country is being conducted from 9th February. It is thelargest administrative exercise in the country providing statistical data on differentsocio-economic parameters of population.

In response to the overwhelming demand for enumeration of castes other thanScheduled Castes and Scheduled Tribes in Census 2011, it has been decided tocanvass caste as a separate time bound exercise. This exercise will start inJune 2011 and will be completed by 30th September 2011.

IV. Improving Governance

UID Mission

The UID Mission has taken off and Aadhaar numbers are being generated inlarge numbers. So far 20 lakh Aadhaar numbers have been given and from 1 stOctober 2011, ten lakh numbers will be generated per day. The stage is now setfor realizing the potential of Aadhaar for improving service delivery, accountabilityand transparency in governance of various schemes.

IT Initiatives

The backbone of an efficient tax administration is a robust IT infrastructure andits deployment for enhanced taxpayer services. Towards this objective, both theCentral Boards of Direct Taxes (CBDT) and Excise and Customs (CBEC) haveput in place the following measures:

o The on-line preparation and e-filing of income tax returns, e-payment of taxes through 32 agency banks, ECS facility for electronic clearing of refunds directly in taxpayers bank accounts and electronic filing of TDSreturns are now available throughout the country. These measures haveempowered taxpayers to meet their tax obligations without visiting anincome tax office.

o The Centralized Processing Centre (CPC) at Bengaluru has increased itsdaily processing capacity from 20,000 to 1.5 lakh returns in 2010-11. This


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project has won a Gold Award for e-Governance in 2011. Two more CPCswill become operational in Manesar and Pune by May 2011 and a fourthCPC will come up in Kolkata in 2011-12.

o With the completion of its IT Consolidation Project, CBEC can nowcentrally host its key applications in Customs, Central Excise and Service

Tax. The Customs EDI system now covers 92 locations across thecountry. CBEC's e-Commerce portal ICEGATE, has also been conferred aGold Award for e-Governance.

o The 'Sevottam' concept has been adopted by both Boards. The three pilotprojects of Aaykar Seva Kendras (ASKs) under CBDT have come of age.CBDT will commission eight more such centers this year. In 2011-12,another fifty ASKs will be set up across the country. CBEC has alsolaunched a similar initiative and four of their pilot projects have beencommissioned.

o The electronic filing of Tax Deduction at Source (TDS) statements hasstabilized. The Board shall soon notify a category of salaried taxpayers

who will not be required to file a return of income as their tax liability hasbeen discharged by their employer through deduction at source.o CBDT will provide a separate web-based facility to enable a direct, stand-

alone interface for taxpayers with the Income Tax Department so that theycan report and track the resolution of their refunds and credit for prepaidtaxes.

Corruption

A Group of Ministers has been constituted to consider measures for tacklingcorruption. The Group has been tasked with addressing issues relating to State

funding of elections, speedier processing of corruption cases of public servants,transparency in public procurement and contracts, discretionary powers of Central ministers and competitive system for exploiting natural resources. TheGroup will make its recommendations in a time bound manner.

Rupee Symbol

Indian Rupee now has a new symbol which has been notified for use by theCentral and State Governments, business entities and the general public. A newseries of coins carrying this symbol will be issued shortly. The Government hasapproached Unicode Standards Authority for inclusion of the symbol ininternational standards.

V. Budget Estimates 2011-12

The Gross Tax Receipts are estimated at 9, 32,440 crore which is an increaseof 24.9% over the Budget Estimates for 2010-11. After devolution to States, thenet tax to Centre in 2011-12 is 6, 64, 457 crore. The Non Tax RevenueReceipts for 2011-12 are estimated at 1, 25,435 crore.


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To reduce the qualifying age, from 65 years to 60 years

To enhance the exemption limit from 2, 40,000 to 2, 50,000

Very Senior Citizens

A new category of Very Senior Citizens, 80 years

Who will be eligible for a higher exemption limit of 5, 00,000

Corporate Tax

Proposal to reduce surcharge to 5% from existing 7.5%. Simultaneously, Proposal to increase the rate of Minimum Alternate Tax (MAT)

from the current rate of 18% to 18.5% of book profits.

Proposal to levy MAT on developers of Special Economic Zones as well as unitsoperating in SEZs.

Foreign Funds for financing infrastructure

Creation of special vehicles in the form of notified infrastructure debt funds

Subject interest payment on the borrowings of these funds to a reducedwithholding tax rate of 5 % instead of the current rate of 20 % exempt the incomeof the fund from tax.

Infrastructure related investments Promotion

Extension of tax exemption in additional 20,000 for investment in long-terminfrastructure bonds (announced in 2010-11)

Investments in foreign companies or Subsidiaries

Till date taxation rate on investments made in foreign companies of subsidiariesis 100%; this has resulted into negative impact or disincentive, but a proposal ismade to bring tax rate down to 15% with an expectation of inflow of funds intocountry.


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Agriculture related Benefits

Proposal of giving an extension of investment linked deduction to businessesengaged in the production of fertilizers. (for boosting production)

Housing related benefits Considering the importance of housing, Proposal investment linked deduction to

businesses which develop affordable housing under a notified scheme.

Innovation and Research related Exemptions/benefits

Proposal to raise weighted deduction on payments made to NationalLaboratories, universities and Institutes of technology, for scientific research, to200 % from 175% (last year)

Effects of the proposal

With the proposals made on Direct Tax, an estimated loss of 11,500 crore mayresult to government treasury

INDIRECT TAXES

Central Excise Rate Proposal to maintain at 10%

Roadmap for GST

As of now about 100 items are exempted from Central excise and State VAT.

As of now 370 items are under tax exemption from central Excise but arechargeable under VAT. Proposal is to exempt 130 items from above items as theyare directly of consumer goods. Remaining 240 items would be brought under GST (when it will be introduced)

Central Excise

Proposal of charging 1% on about 130 items, further no credit cenvat would beavailable to those items.


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Basic food items and fuel would continue to exempt.

VAT

As most of the states have increased rate of VAT from 4% to 5%, so proposal to

increase Central Excise from 4% to 5%.

Readymade Garments and Made-up Textiles

As per prevailing norms there is an optional excise duty regime. It means amanufacturer is required to pay duty only if he wishes to avail of Cenvat credit.But with decent growth; as part of base expansion, I propose to convert theoptional levy into a mandatory levy at a unified rate of 10 %. (But it is applicableonly on branded garments)

Agriculture and Related Items

Extending full exemption from excise duty to air-conditioning equipment andrefrigeration panels for cold chain infrastructure

Including conveyor belts in the full exemption from excise duty to equipment usedin cold storages, mandis and warehouses.

Specified machineries were given concession rate of 5%, proposal is made tobring it further down to 2.5% and it is also applicable on its spare parts

Proposal to reduce the basic customs duty on micro-irrigation equipment from7.5 per cent to 5 per cent.

Environment Related

Last year full exemption of 4% was proposed on electrical vehicles, this year proposal has been made for exemption on batteries imported for such vehiclemanufacturers. (for replacement)

Vehicles based on Fuel cell or hydrogen cell technology to be given concessionalrate of 10%

Hybrid vehicles importers are given a special concessional rate of 10% exciseduty.

Proposal is made to concessional rate of 5% instead of 10% on a kit which isused in conversion of fossil fuel vehicles into hybrid vehicles.

Proposal is made to reduced excise duty on LED lights to 5%.


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Solar lanterns imported from abroad are to be charges a concessional rate of 5%instead of 10%. Further, inputs (materials) used for manufacturing such lanternsare to be fully exempted.

Crude Palm Stearin for use in the manufacture of laundry soap (for environment

protection)

Enzyme based preparations for pre-tanning are to be fully exempted for protection of environment.

INFRASTRUCTURE

Capital goods imports for the expansion of existing mega or ultra mega power projects are to fully exempt.

Proposal of exempting full Bio-asphalt and specified machinery for its applicationin the construction of national highways. Also Tunnel-boring machines requiredfor the construction of highways are also being included in this exemption.

Other Proposals

As per prevailing norms only works and antiquities are exempted when importedfor display in national institution or public museum. But now proposal has beenmade for exemption when is imported even for private art galleries or similar premises that are open for general public.

Exemption on spares and capital goods for ship repairing units, further this has tobe extended to ship owners too.

Indian Film industry which is using jumbo rolls, are to be exempted from 400feets and 1000 feets.

These proposals will results into revenue gain of 7,300 crore.

Service Tax No change in service tax (10%)

Proposal has been made in hotel accommodation in tariff of 1000/day for effective rate of 5% (after concession of 50% in applicable rate)


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Air conditioned Liquor bars who are licensed to serve liquor will be charges at 3%(after concession of 70% in applicable rate)

Private hospitals with an accommodations capacity more than 25 bed are to becharges at 5% ((after concession of 50% in applicable rate) on payments made

by person or by insurance companies. But important to mention that Governmenthospitals shall be outside from this levy.

A Flat rate of tax shall be charged on domestic air-tickets of 50 and 250 for international journeys only in economy classes. But 10% service tax proposalhas been on higher classes in air-travel, applicable on both domestic andinternational.

Service tax shall also be applicable on investments in life insurance companieson the line with same as in case of ULIPs.

Huge surge on individuals or sole proprietors paying service tax. Proposal hasbeen made to bring down this to minimum 60 lakhs turnover for an exemptionof Audit. A proposal is also made surcharge in form of interest payment if thedelay is found in payments of tax. Interest Rate applicable is 3%.

These proposals may end up resulting into revenue gain of 4,000 crore.

Overall changes in indirect tax structure will result into net revenue gain of 11,300 crore

In the end with changes in direct and indirect taxes shall resultsinto net revenue loss of 200 crore.

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Central Budget 2011-12

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