FM announces 2% cut in general rate of excise duty and service tax; No change in Excise duty rates of 8% and 4%; Anomaly related to Sec 10AA benefits for SEZ and DTA units removed; Duty concession granted to Naphtha for power generation

NEW DELHI, FEB 24, 2009: WHILE addressing the House the Interim Finance Minister, Mr. Pranab Mukherjee, today granted the least expected Third Stimulus package by extending the duty relief granted so far beyond March 31, 2009 and also granted following concessions:

Central Excise

++ General reduction in Excise Duty rates by 4 per cent points was made with effect from 7.12.2008.  It is now being extended beyond 31 March, 2009.

  In addition, it has now been decided to:

++ reduce the general rate of Central Excise duty from 10 per cent to 8 per cent.

++ retain the rate of central excise duty on goods currently attracting ad valorem rates of 8 per cent and 4 per cent respectively;

++ reduce the rate of central excise duty on bulk cement from 10 per cent or Rs. 290 PMT, whichever is higher to 8 per cent or Rs.230 PMT, whichever is higher.

Service Tax

++ The Government is keen that the business confidence in the Services sector is restored.  It is also our objective that the dispersal between CENVAT rate and the Service Tax rate is reduced with a view to move towards the stated goal of a Uniform Goods and Service Tax.  In line with this objective, it has been decided to reduce the rate of service tax on taxable services from 12 percent to 10 per cent.

++ To provide relief to the power sector, Naphtha imported for generation of electric energy has been fully exempted from basic Customs Duty.  This exemption which was available up to 31 March 2009, is now being extended beyond that date.

++ Section 10 AA of the Income Tax provides for exemption in respect of export profits of a unit located in a Special Economic Zone (SEZ).  The export profits are required to be computed with reference to the total turn over of the assessee.  This has resulted in discriminatory treatment of assessees having units located both in SEZ and the Domestic Tariff Area (DTA) vis-à-vis assessees having units located only within the SEZs.  It has now been decided to remove this anomaly through necessary changes in the Act.

FM announces 2% cut in general rate of excise duty and service tax; No change in Excise duty rates of 8% and 4%; Anomaly related to Sec 10AA benefits for SEZ and DTA units removed; Duty concession granted to Naphtha for power generation

By TIOL News Service

NEW DELHI, FEB 24, 2009: WHILE addressing the House the Interim Finance Minister, Mr. Pranab Mukherjee, today granted the least expected Third Stimulus package by extending the duty relief granted so far beyond March 31, 2009 and also granted following concessions:

Central Excise

++ General reduction in Excise Duty rates by 4 per cent points was made with effect from 7.12.2008.  It is now being extended beyond 31 March, 2009.

  In addition, it has now been decided to:

++ reduce the general rate of Central Excise duty from 10 per cent to 8 per cent.

++ retain the rate of central excise duty on goods currently attracting ad valorem rates of 8 per cent and 4 per cent respectively;

++ reduce the rate of central excise duty on bulk cement from 10 per cent or Rs. 290 PMT, whichever is higher to 8 per cent or Rs.230 PMT, whichever is higher.

Service Tax

++ The Government is keen that the business confidence in the Services sector is restored.  It is also our objective that the dispersal between CENVAT rate and the Service Tax rate is reduced with a view to move towards the stated goal of a Uniform Goods and Service Tax.  In line with this objective, it has been decided to reduce the rate of service tax on taxable services from 12 percent to 10 per cent.

++ To provide relief to the power sector, Naphtha imported for generation of electric energy has been fully exempted from basic Customs Duty.  This exemption which was available up to 31 March 2009, is now being extended beyond that date.

++ Section 10 AA of the Income Tax provides for exemption in respect of export profits of a unit located in a Special Economic Zone (SEZ).  The export profits are required to be computed with reference to the total turn over of the assessee.  This has resulted in discriminatory treatment of assessees having units located both in SEZ and the Domestic Tariff Area (DTA) vis-à-vis assessees having units located only within the SEZs.  It has now been decided to remove this anomaly through necessary changes in the Act.