Redefining venture capital undertaking

NUTS & BOLTS

Venture capital undertaking is currently defined as a domestic company whose shares are not listed on a recognised stock exchange in India and is in the business of providing services or is engaged in the production or manufacture of articles in sectors which are not specified by the Securities and Exchange Board of India.

Now its definition will be aligned with that which is mentioned in the Securities & Exchange Board of India EBI (Venture Capital Funds) Regulations, 1996 made under the Sebi Act of 1992. The amendment will take effect from October 1, 2004.

Push for agro industry
To promote the agro-processing industry, the government is offering a tax holiday on profits for up to 10 years.

To push the new agro processing industries set up to process, preserve and package fruits and vegetables, it will allow a 100 per cent tax holiday on profits for the first five years and 25 per cent on profit for the next five years.

Tax holiday on R&D extended
Companies carrying on scientific research and development and approved by the Department of Scientific and Industrial Research before April 1, 2004 are entitled to 100 per cent deduction of profits for 10 years. This benefit will be extended till the terminal date to March 31, 2005.

J&K tax exemption
New industrial undertakings in Jammu & Kashmir enjoyed 100 per cent tax exemption if they commenced production before March 31, 2004. Pending a detailed examination of the incentives required to promote industrial development in Jammu & Kashmir, the exemption will be extended till March 31, 2005.

Medical help
Ambulances registered even by the private sector hospitals will be entitled to a concessional excise duty of 16%. Earlier the benefit was allowed only to ambulances used by the government and municipal hospitals.

Currently, diagnostic kits for detecting Hepatitis B alone are exempt from excise duty. Under the new proposal, the excise exemption will be extended to kits for detection of all types of hepatitis.

Duty on contact lenses
In order to move towards the Cenvat rate, the government is imposing an 8 per cent excise duty on contact lenses and playing cards. However, general SSI exemption will continue to be available on these items.

Excise duty up
Excise duty on a few items including vacuum flasks, plastic insulated ware, scented supari, prefabricated buildings, laboratory glassware, black and white television sets, populated PCBs, imitation jewellery, candles and parts of clocks and watches has been increased from 8 per cent to 16 per cent.

But in all these cases the general SSI exemption will continue to be available and consumers and small manufacturers will not be affected.

Protecting small match makers
To protect matches made in the non-mechanised sector, the government will increase the excise duty on matches made in the mechanised and semi-mechanised sector from 8 per cent without Cenvat credit to 16 per cent with Cenvat credit.

Excise relief
The budget offers excise relief to LPG gas stoves bearing an MRP up to Rs 2000. The duty has been cut from 16 per cent to 8 per cent.

The excise exemption on footwear has been raised from MRP of Rs 125 to Rs 250. On writing instruments, the excise duty exemption has been raised from products priced at Rs 100 to Rs 200. There's a reduction of excise duty on amusement rides from 20 per cent to 10 per cent

Duty cut on minerals and metals
Customs duty on metals such as ferro alloys, stainless and alloy steel, copper, lead, zinc, tungsten, magnesium and others has been reduced from 20 per cent to 15 per cent.

Duty on all primary, semi-finished forms of irons and steel like ingots and billets, sponge iron, hot rolled and cold rolled bars and rods and coils has been cut to 10 per cent from 15 per cent earlier.

The duty on minerals such as graphite, asbestos, mica, gypsum and others has also been cut from 20 to 15 per cent.

Duty cuts
Customs duty on refractories and inputs for refractories has been cut from 20 to 15 per cent. Raw material for refractories includes natural graphite powder etc. Duty on ashes and residues too, such as zinc smelter and copper mill scale has been reduced from 20 to 15 per cent. Same is the case with catalysts.

State tax exemptions
A sunset clause has been added in case of area based exemptions for Sikkim, Uttaranchal and Himachal Pradesh.

The exemptions would be available only to those new units which are set up or existing units which are substantially expanded and commence commercial production on or before 31.03 2007.

Relaxing tobacco norms in NE
In the exemption scheme for specified units manufacturing tobacco products (other than cigarette and bidis) in the North Eastern region the condition for investing the excise duty amount per quarter within six months from the end of the quarter has been relaxed.

The amount can now be deposited in an escrow account with a condition that the amount can be invested in the North east region within two year of the deposit in the said escrow account.

No collateral education loans up to Rs 7.50 lakh
Commercial banks have now agreed to waive the need for collateral for educational loans for studies in India and abroad up to Rs 7.50 lakh, if a satisfactory guarantee is provided on behalf of the student.

Thus, no student admitted to any professional course, including courses in IITs, IIMs and medical colleges, will be deprived of the opportunity to study because of lack of funds.

New group health insurance scheme
Budget proposes a new group health insurance scheme to be administered through public sector non-life insurance companies. The scheme of insurance of Rs 10,000 at an annual premium of Rs 120 will cover members of self-help groups (SHGs) and other credit-linked groups (CLGs) who avail of loans from banks or cooperative institutions.

Sponsor banks to be held accountable for RRBs
Budget proposes to hold each sponsor bank squarely accountable for the performance of the regional rural bank (RRB) under its control.

RRBs that adopt a new governance standard and which abide by the prudential regulations will qualify for receiving funds from the Government for their restructuring.

Task force for cooperative banks
Budget proposes to appoint a task force to examine the reforms required in the cooperative banking system including the appropriate regulatory regime. The task force will be requested to act with all deliberate speed and submit its report by October 31, 2004.

Farm income insurance to be redesigned
The National Agricultural Insurance Scheme which insures the yield or crop is to be redesigned and a pilot scheme for insuring farm income (as opposed to crop) which was launched in 19 districts across 12 States during Rabi 2003-04, will be extended to Kharif 2004.