Budget 1997-98: Full Text
Indirect Tax Proposals
- Now, I turn to my indirect tax proposals.
- In relation to indirect taxes the CMP has stipulated:
"The progress towards the goal of bringing India's
tariffs in accord with world levels will be measured and
- On more than one occasion, I have stated that we would
achieve the average level of tariffs prevalent in ASEAN
countries by the turn of century. This will give time to
Indian industry to adjust to these changes. This year's
proposals should be seen in this background.
- I propose to reduce the peak rate of customs duty from
50% to 40%.
- High levels of customs duties on capital goods are
inconsistent with our policy of attracting the best
technology. Greenfield investments in large projects
should be globally competitive. I have tried to harmonise
the needs of Indian industry with the requirements of the
capital goods sector. I, therefore, propose a modest
reduction in duty on capital goods from 25% to 20%. This
reduced rate of 20% will also apply to project imports.
Over the next two to three years these rates would need
to be further adjusted to conform to levels prevalent in
other developing Asian countries.
- I also propose to exempt plans, designs and drawings
from the levy of customs duty.
- The customs duty on several inputs for the steel
industry is being reduced. I propose to reduce the duty
on coking coal (of ash content below 12%) from 5% to 3%
and on coking coal of higher ash content, as well as
coke, from 20% to 10%. I also propose to reduce the duty
on nickel from 20% to 10%, on ferro alloys from 25% to
20% and on re-rollable steel scrap from 30% to 20%. All
these measures should benefit the steel industry to
reduce its cost of production.
- Iron and steel products at present generally attract
customs duty at 30%. I do not propose to make any major
changes in the duty structure this year. However, I
propose to reduce the duty on Cold Rolled Coils of iron
and steel from 30% to 25% to help the engineering
industry. I further propose to reduce the duty on ships
brought for breaking from 10% to 5% and on pig iron from
20% to 10%.
- I propose to reduce the duty on non-coking coal from 20%
to 10%. This will help the power sector.
- Chemicals constitute vital inputs for several down-
stream industries including the small scale sector. I
propose to reduce the duty on organic and inorganic
chemicals from 40% to 30% . I also propose to make the
following reductions on certain essential chemicals:
- On linear alkylbenzene, from 30% to 20%.
- On methanol, from 30% to 20%.
- On naphthalene, from 30% to 20%.
- On phenol, from 30% to 25%.
- On catalysts, from 30% to 25%.
- I also propose to reduce the customs duty on dyes,
pigments, paints and varnishes, glues, enzymes and
modified starches from 40% to 30%. These reductions will
significantly benefit our textile industry.
- Mr. Speaker, Sir, the scheduled dismantling of
quantitative restrictions under the Multi Fibre Agreement
will expose all textile exporting countries to stiff
competition. The Ministry of Textiles have created a
"Technology Upgradation Fund" for both the
textile and jute industries to enhance the competitive
efficiency of these sectors. Our textile industry has,
therefore, to upgrade its technologies in the shortest
possible time. Last year, I had reduced the customs duty
on several kinds of textile machinery to 10%. In order to
improve the quality of our garments for exports, this
year I propose to add some more processing machines to
this category. However, to mitigate any adverse impact on
domestic manufacturers, I have decided to allow them to
import the components and parts of these machinery at a
concessional duty of 10%.
- As a relief to the woollen textile industry, I propose
to reduce the import duty on apparel grade wool from 25%
to 20%, on wool waste from 30% to 20% and on woollen and
synthetic rags from 30% to 25%. On flax fibre, I propose
to reduce the duty from 30% to 20%.
- In order to conserve our forest resources, I propose to
fully exempt wood logs, fuel wood, wood chips, etc. from
- The spread of "Information Technology" has
radically altered conventional wisdom on growth
strategies. I propose several measures to encourage this
industry and to reduce costs. These include:
- Full exemption to computer software.
- Reduction of duty on computer parts, other than
populated printed circuit boards, from 20% to
- Reduction of duty on cartridge tape drive and
digital video disc drive from 20% to 10%.
- Reduction of duty on populated printed circuit
boards from 30% to 20%.
- Reduction of duty on integrated circuits from 20%
- Reduction of duty on colour monitor tubes from
20% to 10%.
- Reduction of duty on colour picture tubes from
35% to 30%.
- Reduction of duty on parts of cellular telephones
and pagers from 30% to 20%.
- Reduction of duty on telecom equipment from 40%
to 30% and on their parts from 30% to 20%.
- Ham operators are presently eligible to import specified
equipment upto a value of Rs.50,000 at a concessional
rate of duty. I propose to raise this limit to Rs.75,000.
- I propose to reduce the duty on watch parts and
movements from 50% to 25% and on watch cases of base
metals from 50% to 30%. I also propose to reduce duty on
horological materials from 20% to 10%. This will help our
watch industry to further enhance their quality.
- We are all concerned about the menace of growing
pollution. In order to help reduce the cost of CNG kits,
I have decided to reduce the customs duty on such kits
and their parts from 10% to a modest 5%. Similarly, I
propose to reduce the customs duty sharply on catalytic
converters and their parts to 5% from the existing rate
- To improve the quality of medical care, I propose to
reduce the import duty on medical equipment from 30% to
20%; on linear accelerators of 15 MeV and above used for
cancer treatment from 10% to 0%; and on ophthalmic blanks
for making spectacle lenses from 50% to 20%.
- To promote tourism, I propose to reduce the import duty
on specified equipment required for hotels from 35% to
25% and on specified speciality food items used by
foreign tourists from 50% to 25%.
- I also propose to give some relief to the film and
photographic industry by reducing the import duty on cine
films and other photographic films from 30% to 25% and on
parts of cameras from 50% to 25%.
- I propose to reduce the customs duty on baggage from 60%
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