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Budget 2014: Chidambaram leaves taxes unchanged

February 17: Leaving direct taxes untouched, Finance Minister P Chidambaram slashed excise duties on cars, SUVs and two-wheelers, and capital goods and consumer durables to boost manufacturing and growth.

Presenting the interim Union Budget for 2014-15, he also provided service tax exemption for storage and warehousing of rice like it was done in the case of paddy last year. Also, blood banks have been exempted from its purview.

The 1% surcharge on the "super-rich" having income above Rs 1 crore in a year, and the 5% surcharge on corporates imposed last year, have been allowed to lapse with the finance minister saying, "In keeping with the conventions I do not propose to make any announcements regarding changes to the tax laws."

The budget document does not give figures of the indirect tax concessions, which are valid up to June 30, 2014 and could be reviewed later. They will be notified later in the day.

He justified the excise duty relief saying, "However, the current economic situation demands some interventions that cannot wait for the regular Budget. In particular, the manufacturing sector needs an immediate boost."

To encourage domestic production of mobile handsets, he restructured the excise duty for all categories fixing it at 6% with CENVAT credit or 1% without CENVAT credit.

Customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols has been pegged at 7.5% to encourage domestic production of soaps and oleo chemicals.

Giving budget estimates, the minister said the current financial year will end on a satisfactory note with the fiscal deficit at 4.6%, below the redline of 4.8%, and the revenue deficit at 3.3%.

The fiscal deficit for 2014-15 has been pegged at 4.1%, which will be below the target of 4.2% set by the new fiscal consolidation path. Revenue deficit is estimated at 3%.

Chidambaram said excise duty has been reduced from 12% to 10% on capital goods and consumer non-durables falling under Chapter 84 and 85 of the Schedule to the Central Excise Tariff Act.

Small cars, motorcycles, scooters and commercial vehicles will attract a lower excise duty of 8% from the current 12%, while SUVs will see a 6% reduction in duty from 30% to 24%. This move is likely to encourage manufacturing growth and boost steel consumption.

Outlining a 10-point vision for the future, the finance minister said India must achieve the target of fiscal deficit of 3% of GDP by 2016-17 and remain below that level always.

On the current account deficit, he said there is no room for any aversion for it since the country will run a CAD every year for some more years and it can be financed only by foreign investments - FDI, FII or ECBs or any other foreign inflow.

As part of the vision, he said a developing economy must accept that when the aim is high growth, there will be moderate level of inflation.