Finance Bill 2010-2011 passed in Lok Sabha with few amendments

The Lok Sabha on Thursday passed the Finance Bill for 2010-11, with a special relief package for coffee growers, and tax concessions for healthcare, auto and realty sectors, but without any change in the levies on petroleum products. Finance Minister Pranab Mukherjee moved the bill after the fresh amendments after a 50-minute final reply to the debate on the subject in the lower house of parliament, which was then passed by voice vote.

His concessions included a service tax exemption on low-cost housing schemes, income ax rebate for hospitals that have over 100 beds, reduction in excise on craft paper to 4 percent, and extension of excise rebate on auto components for construction machinery.

The minister also reduced the customs duty on 11 drugs including those for treatment of AIDS and cancer, exempt components for manufacture of optical discs from such levy and reduced the counterveiling duty on waste paper to 4 percent.

During the course of his reply to the debate, Mukherjee justified the hike in excise and customs duties on crude oil and some petroleum products because of the prevailing global situation and said he had taken a “correct” stand by not touching retail prices.

“Instead of duties, I could have taken the administered price mechanism route. But I did not do so because to me it would not have been correct,” the minister said in his final reply to the debate on the Finance Bill for the current fiscal in the Lok Sabha.

He said it was because of hiking the duties that the state governments would get a 32 percent share of the measure, amounting to Rs.26,000 crore, based on the formulae for sharing of central revenues.

The minister’s comments came against the backdrop of cut motions moved by opposition parties on the demands of grants of the oil ministry, basically expressing displeasure over hikes in duties. The cut motions were defeated Tuesday.

In the budget speech delivered Feb 26, Mukherjee had proposed to restore the basic duty of 5 percent on crude oil, 7.5 percent each on diesel and petrol, and 5 percent on other petroleum products. He also proposed sought to hike excise on petrol and diesel by Rs.1.

He also took up another step that was widely criticised and said the impact of service tax on domestic and international air travel in economy class would be minimal and amount to no more than Rs.100 and Rs.500, respectively, at the highest level.

“Let me tell you, the impact is not all that high,” Mukherjee said in his final reply to the debate on the Finance Bill for the current fiscal, adding that he was exempting from service tax the air travel to and from the north-eastern states.

In the budget proposals, air travel on economy class was also sought to be brought into the service tax net. The government was already imposing such a tax on business and first class air travel.

MajorHighlight of Amendment to Finance Bill 2010

1. Service tax relief to construction sector: Abatement hiked from 67% to 75% + exemption granted to travel by air from North-Eastern sector + exemption to modular skill development bodies under ‘vocational institute’ service
2. FM reduces excise duty on hand-rolled cheroot (bidis) + excise duty exemption given to paper and paper board materials + excise duty on waste paper reduced to 4% + MRP scheme extended to excavators, rollers and tunnel boring machines + BCD reduced to 5% for 11 basic drugs and exempt them from excise duty
3. Conversion into LLP: Transfer of shares exempted from capital gains tax
4. FM says he has written letters to 65 countries for amendment in DTAAs for exchange of tax information; Switzerland, Bahamas and Bermuda agreed to do needful
5. FM hikes export duty on raw cotton from Rs 2500 to Rs 10,000 per tonne
6. FM extends Sec 35AD benefits to hospitals of at least 100 beds anywhere in India and housing scheme for slum re-development