Govt ease duties on iron ore exports, cement
Finance Minister P Chidambaram on Thursday announced excise duty concessions for the cement industry, reports Gaurav Choudhary.business Updated: May 04, 2007 06:12 IST
Finance Minister P Chidambaram on Thursday announced excise duty concessions for the cement industry, maintained that fringe benefit tax (FBT) on employees’ stock options would continue but with minor changes, slashed the customs duty on iron ore and extended pass-through tax benefits for venture capital funds investing in infrastructure.
However, no changes were introduced in the income-tax proposals. The exemption stands at Rs 1,10,000, as proposed during the presentation of the Union budget in February. No changes were also announced in corporate tax or service tax rates.
Replying to the debate on the Finance Bill, 2007, in the Lok Sabha, Chidambaram acknowledged that inflation was a major concern but expressed confidence that would be moderated to 4.5 per cent with a combination of fiscal, monetary and supply-side measures.
Chidambaram termed as “unfortunate” the lack of positive response from cement companies on bringing down prices despite several rounds of talks with the government. The average price of cement has risen from Rs 165 per 50 kg bag in January 2006 to Rs 209 per 50 kg bag in February 2007 and to about Rs 240 in March.
The budget had reduced the excise duty to Rs 350 from Rs 400 per tonne on cement whose retail price was not more than Rs 190 per 50 kg bag. On cement that has a higher retail price, the excise duty is Rs 600 per tonne.
Under the new fresh measures announced on Thursday, companies selling cement at a price below Rs 190 for a 50 kg bag will continue to pay the reduced duty of Rs 350 per tonne, while those selling at higher than Rs 190 will have to pay an ad valorem duty of 12 per cent on the retail selling price. “Effectively, this will result in a reduction of prices by Rs 7 per bag,” Chidambaram said.
The government had removed the 16 per cent countervailing duty and 4 per cent special additional duty on imports of Portland cement recently after failing to persuade cement makers not to pass on the burden of additional excise duties to consumers.
Chidambaram also changed the structure of the export duty on iron ore, reducing it Rs 50 per tonne with iron content of less than 62 per cent. The export duty on iron ore fines with iron content of more than 62 per cent and flakes will remain at Rs 300 per tonne. The budget had proposed a flat Rs 300 per tonne export duty on iron ore.
The finance minister said the controversial Banking Cash Transaction Tax would be reviewed next year. He also indicated that the double-taxation avoidance agreement with Mauritius might be revised by mutual consent.
The finance minister also said the fringe benefit tax on sweat equity would remain, but clarified that the fair market value of the shares would be determined on the date of the vesting of options.
Typically, sweat equity goes through a four-stage process: grant of options, vesting of options, exercise of options (the stage at which the employees get the option of buying the shares at a discounted price) and sale of these options in the market. Companies offer the share option to eligible employees at a discounted price from the fair market value.
The finance minister also slashed the customs duty on nickel from 5 per cent to 2 per cent, and scrapped the customs duty on cut and polished diamonds. He also exempted refrigerated vehicles used for transporting fruits and vegetables from import duty.
The pass-through status for investment by venture capital undertakings has been extended to infrastructure sector projects. In the budget, Chidambaram had proposed to provide this concession to specified sectors like nanotechnology, seed research, pharmaceuticals research, dairy, poultry and bio-fuels.
The Finance Bill, 2007, containing the tax proposals for the current financial year, was passed by voice vote after the finance minister’s reply on the debate.