The finance minister retained most of his other proposals, providing only marginal relief to industries such as automobiles, garments, personal computers and printers. On direct taxes, the biggest concession was in the norms for a concessional 15% tax on dividends received from overseas subsidiaries. As against the minimum 50% India holding in such subsidiaries to be eligible for the tax sop, the finance minister has suggested a lower threshold of 26%, benefiting several firms with overseas joint ventures.
Hopes of the promoters of special economic zones, or SEZs, were dashed when the finance minister decided to retain the 18.5% minimum alternate tax (MAT).
While retaining the 10% excise levy imposed on ready-made garments and textile made-ups bearing a brand name, Mukherjee increased abatement to provide some relief to the industry.
Abatement means only a certain portion of the value and not the entire transaction is taxed.
Finance Minister Pranab Mukherjee on Tuesday rolled back the 5 per cent service tax on hospitals and diagnostic services proposed in the Budget, but only till GST comes into force;
Duty on CKD automobile kits halved to 30% :- The finance minister also reduced the proposed Customs duty on CKD kits containing pre-assembled engine, gear box or transmission assembly to 30 per cent from 60 per cent proposed in the Budget. Similarly, automobile makers will have to make do with the new definition of completely-knocked-down kits that saw import duty rise. The finance minister, however, halved the proposed Customs levy to 30%. Most premium cars manufactured by BMW, Audi, Mercedes-Benz, Volkswagen and Toyota will be costlier now. “There is still lack of clarity on the issue. While as per the government definition, we have to assemble engines, transmission and gear boxes locally that may be commercially unviable due to low volumes,” said Vishnu Mathur, director-general of industry body SIAM.
The finance minister also lessened the impact of the move to bring 130 products into the excise duty net by allowing 35 per cent abatement (based on retail sale prices) on many of these items.
|FINANCE BILL PROPOSALS||AMENDMENTS PROPOSED|
|* Reduced tax rate from 30% to 15% on dividends received by Indian companies from foreign subsidiaries in which the Indian company holds more than 50% share capital||* Lowering the holding requirement in the foreign company from 50% to 26%. The move has been welcomed by industry|
|* Mandatory 10% levy on branded ready-made garments and made-ups of textiles with 40% abatement||* Increasing the abatement rate to 55% of the retail sale price so that the overall tax burden comes down|
|* Levy of 1% excise duty on 130 goods||* Abatement of 35% on many of these items|
|* Redefined completely knocked down (CKD) units to exclude pre-assembled engine, gearbox or transmission mechanism from the purview of concessional import duty||* Reducing basic Customs duty from 60% to 30% on CKD kits with pre-assembled engine, gear box or transmission assembly imported for manufacturing vehicles|
He also imposed one per cent “unconditional” excise duty and countervailing duty on mobile handsets. The Budget had proposed an increase in excise duty on mobile handsets from 4 per cent to 5 per cent.
The finance minister also exempted seven specified computer parts from special additional Customs duty.
He also reduced the countervailing duty on computer printers from 10 per cent to 5 per cent and removed the special additional duty of 4 per cent.
The finance minister further sweetened the proposal to charge a lower tax of 15 per cent (as against 30 per cent earlier) on dividends received by Indian companies from foreign subsidiaries by extending the benefit to companies holding 26 per cent or more in subsidiaries as against 50 per cent proposed in Budget.