Budget

Central Excise

I now come to my proposals on central excise. Our excise structure is far too complex. Till some time ago, we had a multiplicity of rates, innumerable enduse exemptions and other distortions. Considerable simplification has taken place. Last July, I promised that within three years we shall have a four rate tax structure. I find that, in the first instance, it is necessary to reduce the dispersion in excise rates. I believe that we can eventually gravitate towards a mean rate around 18%. With this objective in view, I have introduced three new rates, namely, 8%, 13% and 18%. In the process I have done away with the rates of 20% and 10% (except in the case of some petroleum products). Inthe interest of revenue, I have perforce to continue, for time being, the rate of 15% whcih will apply to metals and a few other commodities. However, the excise duty structure is still punctuated with many exemptions. All commodities, with some unavoidable exceptions, should be subject to excise duty at a minimum rate. i rpopose to undertake this exercise in the next year's budget. Cotton yar will continue to bear and excise duty of 5% only. I propose to withdraw the exemptions few cases like jams, jellies, sauces and soups where I propose to impose a nominaal duty of 8%. Similarly, I propose to levy a duty of 8% on pens and ball point pens exceeding a value of Rs.100 per piece and on non-power sun glasses. However, writing ink will be free from excuse duty. On a number of items of mass consumption like biscuits, sugar confectionery, laundry soap, tooth paste, tooth powder, kitchen and tableware of glass, and clocks above Rs. 600 per piece, I propose to reduce the excise duty from 10% to 8%. A rate of 13% would be applied for watches and clocks above Rs. 600 per piece and other items like machinery and parts, tyres and tubes of two-wheeled motor vehicles, fluorescent tubes, and computers and parts thereof. A reduced rate of 13% will aslo apply to X-ray films, sanitary towels, napkins for babies and similar sanitary articles. In respect of a large number of products, I propose to reduce the excise duty by percentages ranging from 2% to 7% and apply the mean rate of 18% would be applicable to many commodities including cocoa and cocoa preparations, instant coffee, sherbats, organic and inorganic chemicals, paints and dyes, electric wires and cables, toilet soaps, detergents, articles of leather, synthetic rubber, fibres and blended synthetic yarn,paper and paper board, plywood, travel goods and a host of consumer duatbels, Agricultural and horticultural machinery are fully exempt from excise duty. I propose to extend the exemption from excise duty to milking machines, dairy machinery and their parts. In order to revive and give a thrust to the ailing jute industry, I proopose to fully exempt all jute and jute products from excise duty. At present, import of equipment and consumables by recognized research institutions free of excise duty. I also propose to reduce the duties of excise on certain items in order to bring about a more balanced excise structure on the whole. The changes proposed are:

Reduction of duty on taxis and cars for the physically handicapped from 30% to 25%.

Reduction of duty on polyester filament yarn from 40% to 30%.

Reduction of duty on cosmetics and toilet preparations from 40% to 30%.

Mr Speaker, Sir, smoking in public is banned in Delhi. The fight against cancer and respiratory diseases continues. my contribution will be to increase the excise duty on non-filter cigarettes, not exceeding 60 mm in length, popularly called mini cigarettes, from Rs 75 per thousand to Rs 90 per thousand. I have also increased the excise duty on other categories of cigarettes. The increases range from Rs 20 to Rs 70 per thousand. There has been no increase in the excuse duty on biris since 1993. I, therefore, propose to increase the excise duty on biris from Rs 5 per thousand to Rs 6 per thousand. The impact of this duty change on the retail price would only be 2 paise for a bundle of 20 biris. As regards cigarettes, the increase would be 15 times more for every mini cigarette.

The small scale sector makes an important contribution to our overall production, provides to our export effort. It is the declared policy of this Government to free the small scale industry from the rigours of cumbersome procedures. In line with this objective, I have radically simplified the scheme of excise duty concessions for the small scale units. I intend to continue the full exemption from duty on clearances upto Rs.30 lakhs in a financial year. There after, a small scale units would be required to pay a flat rate of excise duty on clearances beyond Rs. 30 lakhs and upto Rs.100 lakhs, if the small scale unit does not avail of any modvat credit on duty paid intpurs. The flat rate of duty will be 3% ad-valorem on clearances between Rs.30 to Rs. 50 lakhs and 5% ad-valorem on clearances between Rs.50 to Rs.100 lakhs. The flat rate will apply for all specified good to which the small scale exemption scheme is applicable. In the revised scheme of exemption, the small scale units would not be required to maintain complicated records for avaling modvat. They will also not be, required to determine the classification of goods.

In order to curb avoidance from payment of duty, I have decided to exclude a few items like cotton yarn and texturised manmade yarn from the purview of the SSI exemption scheme.

Mr Speaker, Sir, while it is our policy to moderate the tax rates and simplify procedures, the govenrnment is equally committed to curb evasion of taxes. It is reported that in some sectors, like induction furnace, steel re-rolling mills etc., evasion of excise duty is substantial and the production is not being reported correctly. I propose to tackle this problem by introducing collection of excise duty on the basis of their production capacity. Suitable legislative changes in the excise law for enabling the implementation of the aforesaid change are under consideration. The details of the proposals would be submitted to this House in due course.

The average citizen consumes a basket of commodities. As a result of my proposals some increases and many reductions I believe the basket will carry a significantly lower tax burden.

The services sector contributes nearly 40% to the GDP. 'Services' are products as much as 'manufactured goods'. Both must bear taxes. Hence, I propose to extend the service tax to cover a number of well known services like:

Transportation of goods by road.

Consulting engineers; o Custom house, Steamer and Clearing and Forwarding agents.

Air travel agents, tour operators and car rental agencies.

Out-door caterers, pandal contractors and mandap keepers.

Man-power recruitment agencies.

The proposals on service tax are estimated to yield a revenue of Rs.1200 crore in a full year. However, for the financial year 1997-98, I am taking credit for Rs.900 crore. I wish to inform the House that in order to improve our national highways, I propose to utilise the bulk of the proceeds realised from service tax on transportation of goods by road to augment the resources of the National Highway Authority.

On the conventional basis, my proposals relating to reduction in customs duties are estimated to result in a loss of Rs.2625 crore in a financial year and, in the case of excise duties, my proposals are broadly revenue neutral. However, the buoyancy and the growth momentum that would be imparted to the economy would more than compensate for our losses computed through the conventinal calculations.

I now have to say something on behalf of my colleague the Minister of Commu- nications who has made a statement ealier today. A revision of tariffs for some postal services has become unavoidable. However in doing so, we have kept in view the interest of the common man and the role of postal services in meeting wider social obligations. While there is no change for Registered Newspaper the price for ordinary Post Card is being raised to 25 paise and printed Post Card to Rs. 1.50. The price for Inland Ietter is also being raised from 75 paise to Rs.1 and for Envelope from Re. 1 to Rs 2. Certain other changes are also being effected which is explained in the Memorandum circulated alongwith the budget documents. The changes will take effect from a date to be notified later. The proposed, revisions are estimated to yield an additional revenue of Rs.367 crore in a full year and Rs.305 crore during 1997-98. This modest increase is necessary for the development of postal services and in partially bridging the deficit on the numourous services being provided by the Postal Department.

Copies of notifications giving effect to the above changes in customs and excise duties will he laid on the Table of the House in due course.

Mr Speaker, Sir, as I come to the end of my labours, let me look at the final outcome. The revenue deficit in 1997-98 is placed at Rs.30,266 crore or 2.1% of GDP. The fiscal deficit comes to Rs.65,454 crore which is 4.5% of GDP. I have not wavered in my commitment to continue on the course of fiscal correction. With the support of this House, and as promised in the CMP, I hope to bring the fiscal deficit under 4% in the next budget.

Our goal must be to achieve rapid and broad-based growth which alone can ensure higher employment, better living standards and a humane and just society. The challenges that we face today are not unique to India. Other countries, including our friends in Asia, have faced similar challenges. Japan showed the way. Other Asian countries are surging ahead. And, finally, there is the example of China, powering its way to becoming the second largest economy in the world. These countries have shown that with courage, wisdom and pragmatism they can find their rightful places in the world.

Deng Xiao Peiig, to whom we paid homage a few days ago, once said, "From our experience of these last few years, it is entirely possible for economic development to reach a new stage every few years. Development is the only hard truth." India's economy has also reached a new stage. Our beloved India is far stronger today than she was six years ago.

I would appeal to this House, and to the Indian people, to heed the call of Gurudev Rabindranath Tagore.

"Desha desha nandita bd mandrita tabha bheri, Aashilo jata birabrinda aashana tabha gheri. Deen aagata oyi. Bharat tabu kayi? Shay ki rahila lupta aaji shaba-jana-paschatay? Louk bishwakarmabhar mill sliabar shathay"
(Thy call has sped over all countries of the world And men have gathered around thy seat. The day is come; but where is India? Does she still remain hidden, lagging behind? Let her take up her burden and march with all.)

Mr. Speaker, Sir, with these words, I commend the Budget to this august House.