The Finance Minister, Mr Pranab Mukherjee, today said that the economy has started showing signs of recovery and that it was possible to register 8-9 per cent GDP growth by the end of 2010.
Winding up the discussion on the Finance Bill (No 2), 2009 in Lok Sabha, the Finance Minister announced a slew of amendments on both income-tax and service tax fronts to achieve the objective of generating economic activity in the present environment of economic slowdown.
The Lok Sabha later passed the Finance Bill (No 2) 2009, completing the third and final stage of the Budget exercise for 2009-10.
The latest amendments would particularly stimulate the housing sector, where developers have now been given tax holiday on profits derived from certain projects, roads sector (removal of service tax on repairs and maintenance of roads), industrial parks (sunset clause extension by two years till March 2011) and seven-year tax holiday on natural gas produced from coal-bed methane (CBM) blocks under IV round of bidding.
Moreover, tax holiday has now been extended for the business of processing, preserving and packaging of meat and meat products and poultry, marine and dairy products.
Mr Mukherjee also announced an interest subvention scheme to support lower and middle income housing. Under this scheme, interest subvention of one per cent would be provided to all housing loans up to Rs 10 lakh to individuals, provided the cost of house does not exceed Rs 20 lakh.
The Government would spend Rs 1,000 crore towards the interest subsidy, which will be routed through the commercial banks and the housing finance companies registered with the National Housing Bank.
To provide stimulus to the housing sector, tax holiday has been extended to real estate developers on profits derived from projects approved between April 1, 2007 and March 31, 2008, if such projects are completed on or before March 31, 2012.
I expect the developers to pass on the benefit of the tax holiday to the home buyers by appropriately reducing their prices, Mr Mukherjee said, adding that both the expenditure and tax foregone initiative would help revive the real estate sector.
Mr Mukherjee also assured the House that the draft of the new direct tax code would be released for discussion shortly and that the Bill would be introduced in the winter session. This new code will bring major changes in direct tax law and its administration, he added.
On Goods and Services tax (GST), the Finance Minister said that constitutional amendments can be pursued if legal pundits recommend them for ushering in the major tax reform. Mr Mukherjee also said that it was possible for GST to be introduced on April 1, 2010, through the co-operation of the States.
Stating that the economic situation has improved, Mr Mukherjee highlighted that the sectors of steel, cement and crude oil saw positive improvement in June and some sectors in the first three months of the current fiscal. In particular, recent manufacturing sector growth was quite encouraging.
Fiscal stimulus we had provided had paid dividends to us. We had recorded economic growth of 6.7 per cent growth in 2008-09 even as some international agencies predicted less than five per cent growth, he said.
Meanwhile, for CBM blocks, tax holiday has now been extended to gas produced from CBM blocks to be licensed under the IVth round of bidding. This puts to rest all uncertainties on whether tax benefits would be extended to CBM blocks also. In Budget 2009-10, the Finance Minister had extended seven-year tax holiday for gas produced under NELP VIII.
The Government had in April simultaneously launched eighth round of NELP and fourth round of CBM offering 70 exploration and 10 CBM blocks, respectively. Under the tax holiday for NELP VIII and CBM IV, profits from production of natural gas is proposed to be tax exempt for seven consecutive years in cases where commercial production starts on or after April 1, 2009.