Resisting any major changes in his taxation proposals, Finance Minister Pranab Mukherjee today instead did some tinkering with service tax and tax holiday clauses in the Finance Bill.
To provide stimulus to the infrastructure sector, the sunset clause for industrial parks has been extended for the next two years, till March 31, 2011. Replying to a debate in the Lok Sabha, Mukherjee said tax breaks would be offered to all food processing units, especially perishable items like meat and dairy products.
Besides, a tax holiday has been extended for commercial production of natural gas in blocks licensed under the fourth round of bidding for exploration of coal-bed methane. The FM announced amendment to sub-section (9) of section 80-IB of the Income Tax Act.
The FM also announced an amendment to the provisions of section 80E of the Income Tax Act, which allows deduction in interest paid on education loans for pursuing higher studies. The deduction would now be available to the legal guardian of the student. For persons with severe disability, the tax deduction rate has been increased from Rs 75,000 to Rs 1 lakh.
The finance minister exempted repairs and maintenance of roads from service tax with immediate effect. Also, the service tax on new services proposed in Budget would come into effect from September 1. Trade and industry has requested that sufficient time be provided between notifying such changes and making them effective, enabling adjustments in business accounting systems and software, said Mukherjee. On July 6, in his budget speech, he had announced levying of service tax on legal consultancy services, cosmetic and plastic surgery, etc.
On growth, the minister said India would have to achieve 4 per cent growth in agriculture to get back to 9 per cent annual GDP growth. According to him, 8-9 per cent annual growth would be achieved by the end of 2010. He said there were signs of economic recovery and some manufacturing sectors like cement and crude oil have shown positive signs in the month of June. He, however, added that situation is still difficult and the government would use more measures to give fillip to GDP growth.
Reforms will be on our agenda, he said. The three stimuli packages the government introduced last year have provided a cushion to the economy to help it grow it at 6-7 per cent in the current year, said the FM, adding that it cost the government Rs 2.14 lakh crore.