New Delhi: In a bid to provide a fillip to the manufacturing sector, the government on Monday reduced excise duty on cars and commercial vehicles and slashed it on a host of capital goods and consumer non-durables till June 30.
"In keeping with the conventions, I do not propose to make any announcements regarding changes to the tax laws. However, the current economic situation demands some interventions that cannot wait for the regular Budget," Finance Minister P Chidambaram said in the interim budget.
He restructured excise duties for all categories of mobile phone handsets to encourage domestic production and discourage imports. The rates will be 6 percent with CENVAT credit or 1 percent without CENVAT credit.
To stimulate growth in capital goods and consumer non-durables, the Finance Minister announced a reduction in excise duty to 10 percent from 12 percent on a range of goods till June 30.
In a bid to provide relief to the automobile industry, where sales have declined, the government lowered excise duty till June 30.
The new excise duty on small cars, motorcycles and scooters is 8 percent as against 12 percent earlier.
On SUVs, excise duty has been brought down to 24 percent from 30 percent. Excise duty on large cars will now be 24 percent compared with 27 percent earlier, while the duty on mid-sized cars will go down to 20 percent from 24 percent previously.
Manufacturing productivity has been low for the past few months and with the concessions for capital goods, auto and consumer durables, demand and therefore productivity is expected to increase, said Sachin Menon, Partner and National Head, Indirect Tax, at KPMG in India.
The government rationalised the customs duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols at 7.5 percent to encourage domestic production of soaps and oleo chemicals.
To boost domestic production of specified road construction machinery, the government made countervailing duty applicable similar imported equipment.
Chidambaram announced a concessional customs duty of 5 percent on capital goods imported by the Bank Note Paper Mill India Private Ltd to promote indigenous production of security paper for printing currency notes.
The government also proposed to exempt the loading, unloading, packing, storage and warehousing of rice from service tax.
Services provided by cord blood banks have also been exempted from the levy.
