Mat Waiver For Sick, Backward Area Units

The minister has also not made any changes in the depreciation clauses introduced in the Union budget which prevent companies from setting off other-income gains against depreciation, thereby retaining the government's thrust to target zero-tax comapnies.

Moving amendments to the finance bill in the Lok Sabha, the minister announced a series of changes in indirect and direct taxes. The net revenue impact of the amendments amounts to Rs 31 crore on the customs side and Rs 63 crore in excise.

Direct tax changes include making mutual funds dedicated to investments in infrastructure facilties also eligible for benefits under section 88 of the Income-Tax Act. In addition, he has proposed amendments wherein commercial properties used as stock-in-trade will be exempt from wealth tax.

The changes under customs, among other things, relate to reduction in import duties on computers and peripherals, methanol and stainless steel scrap. He proposed a hike in the tariffs on the import of primary forms of stainless steel and colour picture tubes. The minister also moderated the duty cuts in the case of rayon grade wood pulp.

Chidambaram proposed concessions for small paper mills and totally exempted several items from excise as part of the revisions. To promote employment in the cottage sector, he has exempted specified coir processing machinery from excise.

The finance minister promised that his government would further rationalise the excise duty structure. The number of rates, which has been brought down from 11 to 7 in the budget, will be further lowered to four. In my view we must move to a single excise rate. This is the only way we can distinguish between efficiency and inefficiency, he added.

The finance bill will be debated for 10 hours at the end of which the finance minister will make a final reply. Thereafter, the bill will be put to vote.

Earlier, introducing the amendments, the minister said that the government would widen the tax base by doubling the number of income-tax assessees from the present 10 million. He also emphasised that the government was hardpressed to allow any major fiscal concessions.

The minister maintained that the tax base will be expanded in the next few months. He declined to raise the income-tax exemption limit.

An increase in of the limit from Rs 40,000 to Rs 60,000 would automatically exclude a signifiant number of taxpayers from the net, he explained.

An increase in direct tax receipts makes it possible for moving ahead on reductions in indirect taxes and exempting low income groups, he added.

The minister imparted an air of finality while dealing with the contentious issue of MAT and gave details from several studies which showed that the effective tax collection had actually declined in periods when corporate profits were on the rise.

I am therefore satisfied that MAT is a justified levy. It will require taxes to be paid on book profits. If a company books larger depreciation then the book profits would be lower and closer to the profits declared by the company for dividend distribution, the minister said.

HIGHLIGHTS

* MAT diluted only for sick firms and units falling under backward areas;

* New depreciation norms to come into effect only from 2005;

* Mutual funds dedicated to infrastructure eligible for tax concessions;

* Long-run capital gains tax for partnership firms cut to 20 per cent;

* Commercial properties forming part of stock-in-trade exempt from wealth tax levy;

* Excise duty on paper units with capacity less than 10,000 tonnes, reduced to 5 per cent;

* Vermicelli, absorbent cotton wool, non-absorbent cotton wool, gauze, bandages and similar articles for medical purpose exempt from excise, if marketed without a brand name;

* Specified coir processing machinery exempted from excise duty;

* Excise duty on insulated wares of plastics reduced to 15 per cent from 20 per cent;

* Certain processed narrow woven fabrics of cotton and man made fibres products exempted from excise duty;

* Customs duty on hard disc drive, floppy disk-drive and cd-rom drive reduced from 20 per cent to 10 per cent;

* Customs duty on primary forms of stainless steel, other than stainless steel slabs, increased to 20 per cent from 30 per cent;

* Customs duty on stainless steel scrap reduced to 10 per cent from 20 per cent;

* Expenditure incurred by an assessee while making the cash payment for exemption doubled to Rs 20,000;

* The overall ceiling under section 80-L raised to Rs 15,000 and of this Rs 3,000 will be in respect of units of mutual fund;

* Customs duty on methanol reduced to 30 per cent from 40 per cent, on epichlorohydrin from 40 per cent to 30 per cent and on DBM from 50 per cent to 40 per cent;

* Customs duty on parts of ball or roller bearing would be charged to same rate of duty as applicable to the corresponding bearing;

* Customs duty on colour picture tubes increased from 30 per cent to 35 per cent.