P. Chidambaram leaves direct taxes unchanged in Budget 2014, cuts excise duty on auto, mobile phones; tax on 'super-rich' continued
February, 19th 2014
In sops to middle-class ahead of the elections and to boost manufacturing, P. Chidambaram today slashed excise duty on cars and two- wheelers, capital goods and consumer non durables and acceptance of long standing demand of one-rank-one-pension for ex-servicemen in the 2014 Interim Budget.
Presenting the Budget in the Lok Sabha, Finance Minister P Chidambaram did not propose to make changes in the tax laws except to continue the 10 per cent income tax surcharge on 'super-rich' individuals and up to 5 per cent on corporates.
"In keeping with the conventions, I do not propose to make any announcements regarding changes to tax laws," he said in UPA-II's last budget that sought to provide sops in indirect taxes including reliefs in service tax to storage and warehousing of rice and blood banks.
The revenue sacrifice on account of indirect tax concessions would be Rs 300 to Rs 400 crore in the 40 days remaining in the current fiscal. But a pick up in the demand and sale of products in these sectors would make up for the loss of revenue, he said in his post-Budget press briefing.
On continuance of the tax on 'super-rich' and corporates, he said he has left it to the new government to review the impost that was slapped in the last budget. The concessions will be valid up to June 30 and can be reviewed by the new Government.
In a major relief to ex-servicemen who have been demanding one-rank-one-pension for long, the Minister announced that the government has accepted it in principle for which an allocation of Rs 500 crore has been made.
The concessions aimed at the middle-class and to boost the automobile sector that has been registering a negative growth, include a slashing of excise duty from 12 to 8 per cent on small cars, motor cycles, scooters and commercial vehicles and 6 per cent cut to 24 per cent on SUVs.
Large and middle segment cars will attract an excise duty of 24/20 per cent, reduced from 27/24 per cent. Appropriate reductions will also be made in the excise duty on chassis and trailers.
To stimulate growth in capital goods and consumer non- durables, the Budget proposed to reduce the excise duty from 12 to 10 per cent on all goods falling under Chapter 84 and 85 of the Schedule to the Central Excise Tariff Act.
The other populist measures include continuation of interest subvention scheme for farm loans and a moratorium period for education loans taken before March 31, 2009 to benefit 9 lakh students. The interest moratorium for students will amount to Rs 2,600 crore.
Asked whether the sops were intended to be populist ahead of the elections, Chidambaram said, "My intention was not to please anyone. I wanted to talk to the people directly that we are going through a turbulent phase in the economy."
The allocation for Defence for the coming year has been enhanced by 10 per cent from Rs 2,03,672 crore in Budget estimate of 2013-14 to Rs 2,24,000 crore in 2014-15. Non-plan expenditure estimated at Rs 12,07,892 crore. Of this expenditure on food, fertiliser and fuel subsidy will be Rs 2,46,397 crore, which will be slightly more than the revised estimate of Rs 2,45,452 crore in 2013-14.
Giving Budget estimates, the Minister said the current financial year will end on a satisfactory note with the fiscal deficit at 4.6 per cent, below the red line of 4.8 per cent, and the revenue deficit at 3.3 per cent.
The fiscal deficit for 2014-15 has been pegged at 4.1 per cent, which will be below the target of 4.2 per cent set by the new fiscal consolidation path. Revenue deficit is estimated at 3 per cent.
With the economy reviving, Chidambaram expressed confidence of achieving a 6 per cent GDP growth next fiscal.
Justifying the excise duty reliefs, Chidambaram said, "The current economic situation demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs an immediate boost."
To encourage domestic production of mobile handsets, he restructured the excise duty for all categories fixing it at 6 per cent with CENVAT credit or 1 per cent without CENVAT credit.
Customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been pegged at 7.5 per cent to encourage to domestic production of soaps and oleo chemicals.