Some budget sops to continue indefinitely

Written by Gireesh Chandra Prasad | Gireesh Chandra Prasad | New Delhi | Updated: Feb 24 2014, 21:03pm hrs
Budget 2014According to P. Chidambaram the tax cuts could cost the exchequer about Rs 1,200 crore up to June 30. Reuters
Some of the stimulus measures announced by finance minister P. Chidambaram in his interim budget will continue indefinitely while some will stay for the full fiscal up to March 31, 2015 as the terminal date of June 30, 2014 is applicable only for excise duty cuts on cars and some capital goods, finance ministry officials said.

One of the reliefs that would stay on is the excise duty relief to locally produced mobile handsets, for which no specific date has been mentioned, up to which it would be applicable. Sources said this benefit will not expire on June 30 this year unless the new government takes a conscious call to reverse this decision.

As per the excise duty restructure on mobile handsets announced in the interim budget, companies like LG and Videocon having production facilities in India and have been paying 6% duty with Cenvat credit, can now opt for paying just 1% duty without Cenvat credit.

About 22 crore mobile handsets are sold in India every year.

Also, the extension of the 6% concessional excise duty on products used extensively in engineering, automobile and construction sectors such as Atkinson cycle engines (used for efficiency), transaxle in vehicles, generators, power control units, motors, battery packs and similar other products specified in chapters 296 and 297 of Excise Tariff Act will be available for the full fiscal up to March 31, 2015, sources explained.

According to Chidambaram, the tax cuts could cost the exchequer about Rs 1,200 crore up to June 30. To make up for the shortfall in indirect tax receipts, the revenue department has to make strong efforts at enforcing compliance and plugging tax evasion.

This assumes importance as the most ambitious indirect tax reform, introduction of a Goods and Service Tax (GST), which would have brought in efficiency and widened the tax base, is still to receive political consensus from central and state policy makers.