The Indian Budget 1996-97 The Indian Economy Overview


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Taxation [4]

  1. Over the last few years steps have been taken to reform our indirect tax structure by reducing the number of rates, removing exemptions and by switching over to ad-valorem rates. On the customs side the peak rate of duty was reduced to 50% in 1995-96 accompanied by reduction in rates down the line in respect of all commodities. Central excise duties were also revamped and moved closer to a Value Added Tax with the introduction of Modvat for capital goods and extension of input credit facilities to almost all items necessary for the manufacture of goods. These changes have contributed to the growth in industrial production, simplified the tax structure and brought about greater transparency. They have also led to strong growth in revenues, with indirect tax collections increasing by 19 per cent in each of the last two years, in spite of substantial reduction in rates. The Common Minimum Programme mandates the government to continue with tax reforms and I propose to do so.

  2. Keeping in view the twin objectives of making our industry globally competitive and providing it reasonable levels of protection in the transitional period, I propose to take measured and calibrated steps in the matter of customs tariffs.

  3. The salient features of my proposals are-

  4. India has become a major producer and exporter of chemicals. This industry has shown a healthy growth in the last two years. This is an area in which India can exploit its potential of trained technical manpower and become a leading nation of the world in the production of chemicals. To achieve these objectives, I propose to take the following steps:

  5. Our textile industry employs millions of people. It is necessary to modernise it and provide an environment in which it can grow rapidly. I propose the following measures:

  6. I also propose a major restructuring of excise duties in the textile sector, extending the benefit of Modvat, to which I shall come a little later. I am confident that with these measures our textile industry will grow from strength to strength in the coming years.
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