Budget 2001-2002

111. Excise duty on High Speed Diesel was reduced from 16% to 12% in September last year. I propose to restore it to the normal CENVAT rate of 16%. I also propose to restore special excise duty on motor spirit to the previous rate of 16%. The burden of increase in duty is not proposed to be passed on to the consumers except for any technical corrections.

112. LPG is charged to excise duty at 8%. I propose to apply the same rate of duty to Compressed Natural Gas, which is exempt at present.

113. A special scheme of charging excise duty from independent textile processors on compounding basis was introduced in December 1998. The working of this scheme has resulted in serious distortions. I have therefore decided to revert to the ad valorem duty structure for independent textile processors with effect from 1, March 2001. Independent processors would be allowed to take CENVAT credit of the duty paid on inputs on a deemed basis. 

114. There is no economic logic to continue with excise duty exemption on garments sold under a registered trade name. I propose to impose a duty of 16% on such garments.

115. Products of SSI units are exempt from excise duty up to Rs one crore. This exemption is intended to provide fiscal support to the genuinely small producers. I propose to withdraw this exemption in respect of the following items, in which misuse of the exemption is more than likely:

� Cotton yarn

� Ball or roller bearings

� Arms and ammunition for private use

116. The excise duty structure on matches comprises rates of duty ranging from 25 paise to Rs 2.40 per hundred boxes of 50 sticks each. I propose to rationalise the existing rates to a more rational structure with a duty rate of 50 paise for the handmade sector, Re.1 for the middle sector, Rs 2 for the semi-mechanized sector and Rs 3 for the mechanized sector.

117. Mr. Speaker, Sir, in the matter of rates of duties of excise I have almost achieved the ultimate with only one basic rate of CENVAT and one rate of special excise duty. The procedures in excise have also been made modern. I can humbly claim that excise duty is now a model of value added tax up to the manufacturing stage. 

118. The only issue, which remains to be tackled now, is the issue of individual exemptions. The regime of exemptions is incompatible with a simple, equitable and rational tax structure that has now been put in place. I am not doing away with the exemptions altogether, realizing that this may come as a sudden shock to those who are accustomed to exemptions. However, I will like to give notice to them to be prepared to pay duties like anyone else. For the present, I am making a modest beginning by imposing a nominal duty of 4% on some items like goggles, imitation jewellery, rubberized mattresses etc. which in four equal annual installments will be taken to 16%. More and more items will be put on this escalator every year.

119. Structural changes have taken place in the economy with the service sector growing faster than other sectors. I am expanding the net of service tax and I propose to add the following services to the list of taxable services:

• Specified Banking and Financial Services

• Authorized Service Stations for servicing of vehicles including two wheelers

• Port Services

• Broadcasting Services

• Photographic Services

• Convention Services

• Sound Recording Services

• Scientific and Technical Consulting Services

• Telex Services

• Telegraph Services

• Facsimile Services

• On-line Information & Data Base Retrieval services

• Video Tape Production Services

• Services auxiliary to Insurance

120. I propose to bring the service provided to lease circuit line holders also in the tax net.