Jaswant's Rs 10,000 crore poll gift

Peak customs duty on non-farm goods down to 20%, 4% SAD abolished

Finance Minister Jaswant Singh presented a Rs 10,000 crore pre-poll bonanza to the industry by slashing customs and excise duties across sectors in a mini-Budget aimed at boosting economic sentiment and fuelling growth.

He has cut the peak customs duty by 5 percentage points to 20 per cent, abolished the 4 per cent special additional duty and pruned the import duty on project imports with a minimum investment of Rs 5 crore to 10 per cent from 25 per cent now.

The first two measures are expected to cost the exchequer Rs 3,500 crore and Rs 5,200 crore, respectively.

While a cut in customs duty will increase the competitive pressures on domestic manufacturers, it will also ease the inflation build-up.

It will also help the government deploy its foreign exchange reserves better through a higher demand for imports.

To garner middle-class support, Singh exempted salaried employees with an annual income of less than Rs 1.5 lakh and pensioners from filing returns.

He also made it easy for taxpayers to furnish paperless returns through the Internet and linked the interest rate on housing loans to the prevailing market rate for perquisite valuation.

While the indirect tax measures come into effect tomorrow, the direct tax procedural simplifications come into effect from April 1, 2004.

Singh's largesse to Corporate India is focused on power, information technology, electronics, healthcare and aviation.

He has made healthcare more affordable by cutting the Customs duty on life-saving bulk drugs and medical equipment to 5 per cent besides exempting them from the countervailing duty.

Computers will become cheaper due to the halving of excise duty to 8 per cent. Cellphone prices are also expected to drop with a cut in the import duty on handsets to 5 per cent from 10 per cent.

In what could also immediately result in lower air fares, Singh halved the excise duty on aviation turbine fuel to 8 per cent and did away with the 15 per cent inland air travel tax and the Rs 500 per passenger foreign air travel tax, drawing from the Naresh Chandra committee report on civil aviation.

To attract investments and give a fillip to the power sector, Singh took cues from the NK Singh task force and slashed the Customs duty on transmission and distribution equipment and electricity meters from 25 per cent to 10 per cent and 15 per cent, respectively.

For the ICE segment, he has cut the Customs duty on raw materials used for manufacture of electronic components for optical fibres and cables, from 5-15 per cent to 5-0 per cent.

Singh has also provided non-resident Indians an incentive to bring home a larger number of goods, including laptops, PCs, VCD players and VCRs by relaxing the transfer of residence rules.

Duty on the remaining 17 items, including home theatres, music systems, vessels, gold, video cameras and even aircraft, has been halved to 15 per cent. Tourists, too, can bring home 2 litres of alcohol, photo films and laptops as part of duty free baggage.

According to finance ministry officials, Singh's main intention was to reinforce the feel-good factor and give a further impetus to growth.

While the revenue giveaway will have an impact on the fisc, the officials said higher growth would nullify it in the long run.

Though the finance ministry is proceeding with preparations for a full-fledged Budget, it has kept the vote-on-account plan ready. Government sources indicated more announcements would follow.

The BJP national executive, scheduled to meet on January 11-12, will conclusively give the directions on early polls.

Singh will then be required to present a vote-on-account to Parliament that will authorise government expenditure for the first four months of 2004-05, by which time a new government will be in place.