The Union Budget presented by the Finance Minister Pranab Mukherjee in Lok Sabha today emphasised the need to reach a consensus over allowing 51 per cent foreign direct investment (FDI) in India’s retail sector and tax reforms. However, the apparel industry’s expectations of a breakthrough on excise duty were not fulfilled. The 10 per cent excise duty on branded apparels announced in last year’s Budget continues to be the mood dampener.
On tax reforms front, the FM said that the Direct Taxes Code (DTC) Bill will be enacted at the earliest after expeditious examination of the report of the Parliamentary Standing Committee. He said drafting of model legislation for Centre and State Goods and Services Tax (GST) in consultation with states is under progress and the GST network will be set up as a National Information Utility and will become operational by August 2012. Citing GST implementation as a positive shocker, e-commerce entrepreneurs expect prices of products sold online to come down with the implementation of GST. They expect the GST to make supply-chain more cost effective.
Service tax rate is being increased from 10 per cent to 12 per cent, with consequential change in rates for services that have individual tax rates. The standard rate of excise duty for non-petroleum goods is also being raised from 10 per cent to 12 per cent. No change is proposed in peak rate of customs duty of 10 per cent on non-agricultural goods.
Calling for strengthening the investment environment, he said that efforts are on to arrive at a broad-based consensus on allowing FDI in multi-brand retail up to 51 per cent. He proposed to introduce a new scheme called Rajiv Gandhi Equity Savings Scheme to allow for income tax deduction of 50 per cent to new retail investors who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh. He also proposed simplifying the process of Initial Public Offer (IPO).
To help modernization of the textile industry, a number of equipments are being fully exempted from basic customs duty, and lower customs duty is being proposed for some other items used by the textile industry.