THE Finance Minister, Mr Jaswant Singh, in his just-concluded maiden budget speech has paved the way for the third generation reforms in tax administration, procedural simplification and rationalisation of tax duty structure in direct as well as indirect taxes. Going by the magnitude of reforms proposed, it appears that he has managed to overshadow his high-profile predecessor Mr Yashwant Sinha who had the experience of presenting four industry-friendly Budgets.

The much awaited VAT has been introduced in all the states with effect from April 1, 2003 though the news has not been taken happily by trading community. 3 committees has been consituted for monitoring the implementation of VAT. Further in a phase manner Central Government will subsidise the State Government for loss on this account. For the first year their will be 100% subsidy by Central Government during 2003-04. This step has been taken to pre-empt the opposition by some State Governments on introduction of VAT as it would have led to loss of sales tax revenue for state governments.

In the services sector 10 new services have been brought under service tax net. Further the rate of service tax has been increased from 5% to 8%. Tourism and hotel industry has been exempted from service tax.

In the customs side procedural simplifications are key stones of the budget. Self-assessment scheme for all exporters and importers has been introduced which provides universal green channel. Their will be no physical examination of export and import cargo which will be undertaken only on risk assessment basis in exceptional cases. This will further reduce transaction cost for industry.

Peak rate of customs duty has been slashed to 25% from 30%. Customs duty on glucometer has been slashed from 10% to 5%, duty on hearing aid and wheelchair has been reduced.

Custom duty equipments has been reduced to 5%, on textile machinery it has been reduced to 5% and on vetirenary drugs also to 5%. Customs on specific equipments for power projects has been slashed to 5%. Customs duty on tricycles slashed to 5%. Import duty of whisky and liquor has been reduced from 182 to 166 percent. Exemption of customs duty on gift has been increased from 5,000 to 10,000. Customs duty on electronics and computers has been slashed from 25% to 15%. Pre-loaded or bundled software has been exempted from customs. Duty on optical fibre cables and telecom equipments has also been lowered. Duty on cut and polished diamonds and gem stones has been reduced to 5%. Import duty on gold has been reduced from Rs.250 per 10 gram to Rs.100 per 10 gram when brought into the country in serially numbered bars.

In Central Excise reduction from transaction value has been allowed on actual freight incurred under Section 4 of Central Excise Act. 3 slabs for central excise duty at the rate of 8%, 16% and 24% have been recommended for all manufactured products except Tobacco, Petroleum and Pan Masala. Life saving drugs, hearing aids, wheel chair, umbrellas, adhesive tapes, walking sticks, utensils, kitchen articles, knifes, spoons, recorded audio cassette and CDs have been exempted from excise duty. Excise duty on airconditioners and cars have been substatially reduced to 24%. Excise duty on pressure cooker and dental chair has been slashed from 16% to 8%. Chewing tobacco and insecticide have been subjected to MRP based valuation under Section 4A of Central Excise Act. Excise duty on shrimp has been slashed to 5%. Polysters filaments yarn will be subject to lower excise duty; duty on fabrics and garments has also been reduced. Exemption for hand processed fabric continues.

A surcharge of 50 paisa per litre has been imposed on light speed diesel. Additional duty of Central Excise Act is proposed to be ammended and henceforth state governments will be allowed to levy sales tax on sugar and tobacco.