FM rolls back healthcare tax
Relief for garment, auto units too
Finance Minister Pranab Mukherjee on Tuesday announced a rollback of the proposed 5 per cent service tax on healthcare services and extended some tax relief to the branded readymade garment segment.
These concessions along with modifications in tax proposals relating to dividend tax and some popular consumer goods were announced by Mukherjee in the Lok Sabha while replying to a day-long discussion on the Finance Bill, 2011, which contains tax proposals for the financial year 2011-12.
Keeping the middle class in mind against the backdrop of the forthcoming assembly elections in five major states, Mukherjee rolled out a number of tax concessions. Popular consumer goods such as personal computers and mobile handsets will become cheaper.
Mukherjee announced his decision to exempt service tax in “its entirety both in respect of services provided by hospitals, as well as by way of diagnostic tests until the goods and service tax (GST)comes in to force.”
In the Budget for 2011-12 Mukherjee had proposed a 5 per cent service tax on all services provided by hospitals with 25 or more beds that have central air-conditioning as well as conduct all sorts of diagnostic tests. This was dubbed a “misery tax”.
The abatement available for levy of taxes on the retail price of some branded garments and textile made-ups has been raised from 40 per cent to 55 per cent of the retail sale price. This has been done, Mukherjee said, to avert hardship for small scale garment manufacturers.
Mukherjee also slashed the customs and excise duties on mobile handsets, printers and personal computers. Parts of all computer printers imported by actual users will now be eligible for a concessional rate of 5 per cent countervailing duty and nil special additional duty (SAD).
Several specified parts used in personal computers will now be exempted from levy of SAD.
For the automobile industry, the basic customs duty has been cut from 60 per cent to 30 per cent on CKD kits containing a pre-assembled engine, gear box or transmission assembly, imported for the manufacture of vehicles.
To promote the non-conventional energy sector, Mukherjee restored full exemption from excise duty and counter-vailing duty on silicon wafers imported for manufacture of solar cells and modules. Certain types of coking coal imported for the manufacture of iron or steel has been exempted from customs duty.
Mukherjee also modified tax proposals relating to dividend tax to encourage flow of foreign funds into the country.
Mukherjee had proposed a lower tax rate of 15 per cent on dividends received by Indian companies from foreign subsidiary companies in which the Indian company holds more than 50 per cent share capital. Now, the holding requirement in the foreign company has been cut to 26 per cent.
This will enable overseas joint ventures with Indian partnership also to avail of this benefit.
Silk duty cut stays
In a blow to sericulturists who are reeling under the impact of lower import duty, Mukherjee retained his proposal to cut the basic customs duty on raw silk from 30 per cent to 5 per cent.
Mukhjeree defended this, saying it was aimed at augmenting the supply of raw silk to weavers in both the handloom and the powerloom sectors. Later, amid a boycott by the BJP-led NDA the house approved the Finance Bill, thus completing the final phase of approval of Budget 2011-12.
