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.
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.
The salient features of my proposals are-
Reduction in customs duties on crude oil and other
basic petrochemical intermediates.
Reduction in the rates of customs duties on raw
materials and inputs such as chemicals, plastics,
natural rubber and ferrous and non-ferrous metals.
Substantial reduction in customs duties on raw
materials and components required for giving a thrust
to the electronic goods sector.
Reduction in the rate of duty on computers for
giving a boost to the software industry.
Reduction in import duty on selected machinery to
modernize the textiles and garment sector.
Removal of several anomalies in duty rates.
Unification of rates on similar items in order to
substantially reduce disputes on classification and on
Retention of only such exemptions which are necessary,
for the present.
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:
Reduction in the rate of duty on crude oil from 35% to
Reduction in the rate of duty on bitumen from 30% to
Unification of rates at 10% on petro chemical building
blocks such as cumene, toluene and cyclohexane.
Reduction in the rate of duty on chemicals, both
organic and inorganic, from 50% to 40%.
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:
Reduction in the import duty on rayon grade wood pulp
from 25% to 5%.
Reduction in the import duty on acrylonitrile
from 20% to 10%.
Reduction in the rate of duty on DMT, PTA and MEG from
35% to 25%; however in the case of caprolactum the
revised duty will be 30%.
Reduction in the rate of duty on artificial and
synthetic fibres from 45% to 30%.
Unification of the rates of duty on nylon filament
yarn, polyester filament yarn and viscose filament yarn
from the existing levels of 45% and 40% at 30%.
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.