NEW DELHI(PTI):Measures to further open up the economy and Steps to lift the sagging industrial Sector appears to be on the anvil in the union budget for 199293, which according to all indications will be a soft one.
The release of the report of the Raja Chelliah committee which has suggested a maximum customs tariff of 30% as against 110% at present and the slashing of customs duty on 35 consumer durable items as part of baggage shows the government is determined to go ahead with the process of external liberalization.
There is a distinct possibility that the government would bring down the rate of corporate tax to 40 to 45% from the existing 51.5% and Cute excise duties as part of the measures for industrial revival.
Faced with political problems, the government is also likely to raise the income tax exemption limit substantially and bring down the tax rates.
The tax exemption limit according to indications may be raised to Rs 35,000 to Rs 40,000 from the current level of Rs 28,000. This would effectively take care of over 20% inflation during the last two years.
Going by the trend, the government is likely to accept most of the recommendations of the Chelliah committee which has suggested that the maximum rate of tax be brought down to 30% in the next five years. Since the present duty rules at 110%, a duty reduction of 20 to 30% in the coming budget cannot be ruled out Government might decide to peg the maximum duty at 80 to 90%, to bring it in line with the rates in competitive economies. It may be mentioned that reduction in duty from 190% to 110% last year does not seem to have affected the duty realization significantly.
The only consideration the government is likely to have in reducing the duty is the extent of protection that the domestic industry should have.
Since the rupee has already depreciated by nearly 26% over the last one year, a 30% lowering of the duty rate might not bring down the extent of protection of the industry.
The industry has been seeking a “level playing field” and as such seeking a match cut in excise rates in case of a cut in import tariff Beside sacutin excise duty rates, domestic manufacturers of consumer durables on which baggage rules have been liberalized expect corresponding cut in tariff on the import of components, They are of the view that in the coming budget customs duty on components should be brought down between 45 to 80% from the current level of 80 to 180%.
According to reports, revenue collection this year might fall short substantially posing a problem for the finance minister in reducing the fiscal deficit to 5% of GDP in the current financial year.
Article extracted from this publication >> February 19, 1993
