The Hindu Business Line : Centre gets powers to rebate service tax

Tax net
Mr Chidambaram defended the Budget proposal to bring certain categories of cooperative banks under the income-tax net and also the move to do away with the existing tax exemption available to infrastructure capital company under section 10(23G) of the income-tax law.

New Delhi , March 20

In a major boost to the exporting community, the Centre has sought to take powers to rebate the service tax paid on input services used in any goods or services exported from the country.

This formed part of the official amendments made to the Finance Bill 2006, which was passed by the Lok Sabha on Monday through a voice vote.

Currently, service tax is not neutralised by any of the export duty neutralisation schemes of the Central Government. Official sources said the amendment was significant as it allows the Centre to even rebate the service tax paid on input services used in non-excisable goods that are exported from the country.

Replying to the debate in the Lok Sabha on the provisions of the Finance Bill 2006, the Finance Minister, Mr P. Chidambaram, defended the Budget proposal to bring certain categories of cooperative banks under the income-tax net and also the move to do away with the existing tax exemption available to infrastructure capital company under section 10(23G) of the income-tax law.

Citing the `Tax Expenditure Statement' that formed part of the Budget documents, Mr Chidambaram said the amount of revenue foregone from legislated tax rates stood at Rs 1,58,000 crore and highlighted that the size of the gross budgetary support for 2006-07 itself was Rs 1,72,728 crore.

"You can't have a situation where you legislate tax and at the same time grant exemptions. We have to remove the exemptions so that more revenues can be collected and used for governmental expenditure in various programmes. There is no justification for their existence," he said.

Duty exemption

Bowing to the sentiments of certain members of Parliament, the Finance Minister, however, announced restoration of excise duty exemption on candles and bricks, granted excise duty exemption to manually operated rubber roller machines and copra driers besides scented supari in sachets valued up to 50 paise.

He also announced the correction of the duty inversion that had crept in on account of the changes made in the customs duty structure in polyester fibres and yarns and carbon black. Mr Chidambaram said customs duty on polyester chips and carbon black feedstock would stand reduced from 12.5 per cent to 10 per cent.

The Finance Minister also announced that coronary stents and coronary stent systems for use with cardiac catheter had been fully exempted from the 5 per cent customs duty as well as additional countervailing duty of 4 per cent. "It just shows our heart is in the right place," he said.

On the direct tax side, the Government has now said that it would frame and notify a scheme for the purpose of including investments in fixed deposits in scheduled banks for a term of not less than five years in Section 80C of the income tax law.