Mr Singh also exempted political parties from payment of capital gains tax and agreed to total waiver of interest on farm credit in 14 states declared as drought affected.
Winding up the debate on Finance Bill 2003 in the Lok Sabha on Wednesday, Mr Singh announced reduction of customs duty from 15 per cent to 10 per cent for IT industry and provided income-tax deduction of Rs 75,000 for professional earnings of sportspersons. The minister ruled out the possibility of imposing agriculture income-tax.
Changes in tax proposals, according to revenue secretary CS Rao, will not have any significant impact on revenue. In case of edible oil, he said the tax proposals are revenue neutral.
He added though it is difficult to estimate revenue loss on account of reduction in customs duty on IT products, the impact will only be marginal.
Similarly, Mr Rao said, the impact of changes on account of exemptions on life insurance policies and 100 per cent tax exemptions to offshore banking units (OBUs) set up in special economic zones (SEZs) will be marginal.
With the passage of the Finance Bill, the Lok Sabha completed this years Budget business. The House passed the Bill containing direct and indirect tax proposals with a number of official amendments and negativing all opposition amendments. The Bill will now go to the Rajya Sabha.
Bowing to the demand of edible oil industry, the finance minister replaced the 8 per cent ad valorem duty on branded and packed refined edible oil and vanaspati by a specific rate of Re 1 per kg on refined edible oils and Rs 1.25 per kg on vanaspati. This specific rate, applicable at the refining outlet stage, will be neutral to branded or otherwise. Simultaneously, he also removed high duty differential between imported refined palm oil and crude palm oil by reducing customs duty on RBD palm oil from 85 per cent to 70 per cent.
The minister also announced that tax would not be deducted at source on interest awarded on accident compensation up to Rs 50,000. He said service tax would be extended to new services about which details would be announced later but Jammu and Kashmir would not come under its net.
Mr Singh proposed to exempt from income-tax income earned on life insurance policies taken before April 1 this year. In his Budget speech, he had proposed withdrawal in respect of insurance policies whose premium exceeded 20 per cent of the sum assured in any of the years.
The finance ministers concessions covered hand pumps which will be fully exempted from excise duty. He reduced excise duty by half to 8 per cent on tiles manufactured by units not using electricity or petroleum fuels.
He accepted the demand of industries in special economic zones for reinvestment allowance of 50 per cent of the profits ploughed back in business and provided 100 per cent tax exemption to offshore banking units in SEZs for three years and 50 per cent exemption for subsequent two years.
The minister, however, rejected the tea industrys demand for removal of cess of Re 1 on tea and extended certain benefits given to tea industry to rubber industry as well.
As far as textiles sector was concerned, Mr Singh exempted from excise duty unprocessed fabrics and unbranded, woven and knitted readymade garments up to the first clearance of Rs 25 lakh manufactured by handlooms with a turnover of Rs 30 lakh.
Several BJP members joined the Opposition members in demanding that the exemption limit be raised to Rs 50 lakh but Mr Singh declined to oblige saying these figures were arrived after considering all aspects.
The concessions to textiles industry include reduction in excise duty from 10 to 5 per cent on predominantly hand processed fabrics on which a few specfied finishing processes are carried out with power or steam for pure cotton fabrics and from 10 to eight per cent for other fabrics.
Excise duty on interlining fabrics has been reduced from 16 to 10 per cent and rags from 25 to five per cent. Concessional customs duty or five per cent has been expanded to cover 117 more categories of textiles machinery and their parts.
Concessional customs duty of 10 per cent has been extended to twisters and rewinding machines irrespective of the sector of use.
Mr Singh also announced that powerlooms, wherever value of stocks declared did not exceed Rs 10,000 per loom, would not be subject to any scrutiny for tax purposes. However, this would not have any retrospective application or consequences.
On direct tax concessions, Mr Singh said exemptions on long-term capital gains on equity shares would be limited to those appearing in the list of BSE 500 as on March 1, 2003, and where transactions are on a recognised stock exchange.
He extended this exemption to equity shares allotted through public issue on or after March 1, 2003, and listed in recognised stock exchange before March 1, 2004.
As part of concessions to indigenous writing instruments industry, he reduced customs duty on decorative transfer films and dyestuffs used by them from 25 per cent to 15 per cent.