The 2010-11 general budget on Friday provided considerable relief to income tax payers by raising the slabs at two levels but hiked the central excise duty on non-petroleum products across the board from 8 to 10 per cent and the basic duty on crude and petroleum products besides effecting a one-rupee increase per litre on petrol and diesel.
The entire opposition walked out of the Lok Sabha during the presentation of budget by Finance Minister Pranab Mukherjee, dubbing it "highly inflationary". (Oppn stages walkout)
The minister partially rolled back the stimulus by hiking the ad velorum component of excise duty on large cars and multi-utility vehicles by two per cent to 22 per cent. (Maruti announces price hike)
The budget also raised the specific rates of duty on portland cement and cement clinker. The basic duty of 5 per cent on crude petroleum, 7.5 per cent on diesel and petrol and 10 per cent on other refined products is being enhanced. (Fuel prices hiked)
The central excise duty on petrol and diesel is being enhanced by Re one per litre.
The proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs 43,500 crore for the year. The proposals for service tax, in which government plans to bring in some more services, will result in a net revenue gain of Rs 3000 crore for the year.
While direct tax proposals are expected to result in a loss of Rs 26,000 crore for the year, those relating to indirect tax are estimated to result in a net revenue gain of Rs 46,500 crore.
Taking into account the concessions and measures to mobilise additional resources, the overall revenue gain is estimated to be Rs 20,500 crore for the year.
Finance minister Pranab Mukherjee on Friday said the uniform Direct Tax Code (DTC) will come into effect from April 1 next year. (Read related story)
"We have already begun wide discussions before implementing the uniform Direct Tax Code by April 1, 2011. We are involving people and other stake holders on its design," the finance minister said while presenting the general budget for 2010-11 in the Lok Sabha.
The new code seeks to replace the 50-year-old Income Tax Act - that has seen as many as 4,500 amendments since it was enacted in 1961 - to reflect the needs of an emerging economy.
Presenting the budget in the Lok Sabha Pranab Mukherjee also estimated a lower fiscal deficit of 5.5 per cent of gross domestic product (GDP), against the revised estimates of 6.7 per cent for this fiscal.
He said 46 per cent of the plan allocation will be set aside for infrastructure alone and 37 per cent for social welfare programmes, while substantially hiking outlays for rural and urban development schemes, as also for education and healthcare.
"Today, as I stand before you, I can say with some confidence that we have weathered the crisis well," Mukherjee said in his 100-minute speech, recalling the hard days faced by the economy in the past two years and preparing himself to roll back some purse-loosening measures.
"That is not to say the challenges today are any less than they were nine months ago, when the UPA (United Progressive Alliance) was voted back to power under the leadership of Sonia Gandhi and Prime Minister Manmohan Singh."
The finance minister proposed the following slabs for individual tax payers: No tax for an annual income of up to Rs.160,000, a rate of 10 per cent for up to Rs.500,000, then 20 per cent for up to Rs.800,000 and finally 30 per cent on anything higher. (Rs.50 approximately equals $1)
At the peak rate this will entail a saving of up to Rs.50,000, and an overall hit of Rs.26,000 crore ($5.2 billion) for the exchequer. "The proposal to reduce the tax slab will benefit 60 percent of all tax payers," said Mukherjee.
But he also sought to hike the minimum alternate tax to 18 per cent of book profits from the present 15 per cent, though he lowered the surcharge from 10 per cent to 7.5 per cent, which will have a direct impact on the bottomlines of large companies.
The finance minister was interrupted several times, led by an eventual walkout by most opposition members, when he sought to restore 5 percent basic duty on oil and 7.5 per cent each on petrol and diesel, and imposed a Rs.1 excise on these two fuels.
"The customs duty was withdrawn when the prices of the petroleum crude reached as high as $122 per barrel. When it is much softer, there is no reason to continue the same concession," he told reporters later, setting the stage for higher fuel prices.
On augmenting resources, Mukherjee said Rs.25,000 crore ($5 billion) was raised by way of divestment in state-run companies during the current fiscal, adding he was budgeting for Rs.40,000 crore ($8 billion) for the ensuing year.
The finance minister also promised to implement the direct tax code from April next year and assured a simplified foreign investment policy soon, even as excise rates were hiked across the board by 200 basis points.
Those in the packed house presided over by Speaker Meira Kumar included Prime Minister Manmohan Singh, United Progressive Alliance (UPA) chairperson Sonia Gandhi and Leader of Opposition Sushma Swaraj.
This was Mukherjee's fourth budget of his career as finance minister and the second for the United Progressive Alliance (UPA) government in its second straight term after being voted back to office in May last year.
"The finance minister has done a right mix of estimating the growth requirements and at the same time building in it a certain amount of moderation on the price front," said Manmohan Singh, who has himself presented five budgets in the past.
"He has done a commendable job."
Stock markets also gave thumbs up to the budget, which resulted in the sensitive index (Sensex) of the Bombay Stock Exchange closing with a gain of nearly 185 points, or 1.15 per cent, while industry hailed the proposals as pragmatic and growth oriented.
During his speech, Mukherjee said three challenges remained for the economy - to quickly revert to high growth of 9 per cent and cross to double-digit expansion; make growth more inclusive and develop infrastructure; and strengthen food security.
"We hope to breach the 10 per cent growth mark in not-too-distant future."
(With PTI, IANS inputs)