THE ECONOMY : AN OVERVIEW
Sainik Schools: Rs.44 crore allocated to the 22 Sainik Schools at the rate of Rs.2 crore
each, for immediate improvement of infrastructure including classrooms, laboratories,
libraries and facilities for physical education.
Public Distribution System: Rs.32,667 crore being provided next year for food subsidy
under PDS and other welfare programmes; State of Haryana and the Union Territory of
Chandigarh to introduce, on a pilot basis, a smart card based delivery system to deliver
food grains under the PDS.
Unorganised Sector Workers: In anticipation of the Unorganised Sector Workers'
Social Security Bill, 2007 being made into law, three schemes designed to provide social
security to workers in unorganised sector in a phased manner introduced;
o Aam Admi Bima Yojana to provide insurance cover to poor households; in the
first year of the Yojana, LIC to cover one crore landless households by
September 30, 2008; Rs.1,500 crore placed with LIC; Additional sum of Rs.1,000
crore to be placed with LIC in 2008-09 to cover another one crore poor
households in the second year;
o Rashtriya Swasthya Bima Yojana to be implemented with effect from April 1,
2008; Indira Gandhi National Old Age Pension Scheme enlarged with effect from
November 19, 2007 to include all persons over 65 years falling under the BPL
category expanding beneficiary cover from 87 lakh to 157 lakh; Rs. 3,443 crore
being allocated in 2008-09 as against Rs.2,392 crore in 2007-08.
Housing for the Poor: 41.13 lakh houses constructed up to December 2007 under Indira
Awas Yojana (IAY) against a target of 60 lakh houses; Cumulative number of houses
constructed under IAY to be 51.77 lakh by end March 2008; Subsidy per unit in respect of
new houses sanctioned after April 1, 2008 to be enhanced from Rs.25,000 to Rs.35,000 in
plain areas and from Rs.27,500 to Rs.38,500 in hill/ difficult areas to reflect the higher cost of
construction; Subsidy for upgradation of houses to be increased from Rs.12,500 per unit to
Rs.15,000; Public sector banks to be advised to include IAY houses under the differential rate
of interest (DRI) scheme and lend up to Rs.20,000 per unit at an interest rate of 4 per cent.
Defence: Allocation for Defence to be increased by 10 per cent from Rs.96,000 crore to
Rs.105,600 crore.
Backward Regions Grant Fund: Allocation for 2008-09 kept at same level as current year
at Rs.5,800 crore; 45 per cent of the amount likely to be allocated to the States of Bihar,
Orissa and Uttar Pradesh.
Climate Change: Permanent institutional mechanism to be established for development and
coordination role in exploration and implementation of ideas.
Sixth Central Pay Commission: to submit its report by March 31, 2008.
Commonwealth Games: to be provided Rs.624 crore in 2008-09.
Institutions of Excellence: Special grant of Rs.100 crore awarded to three institutions of
excellence for 2008-09
o Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra;
o University of Mysore, Mysore; and
o Delhi University, Delhi.
India's Soft Power: Rs.75 crore grant to Indian Council of Cultural Relations to design and
implement a programme to achieve the objective of projecting the 'soft power' of India in
music, literature, dance, art, cuisine and especially films.
Tiger Protection: One time grant of Rs.50 crore to the National Tiger Conservation Authority
to redouble efforts to protect the tiger; Bulk of grant to be used to raise, arm and deploy a
special Tiger Protection Force.
Monitoring and Evaluation: Central Plan Schemes' Monitoring System (CPSMS) to be put
in place and implemented as Plan scheme; a comprehensive Decision Support System and
Management Information System also to be established to generate and monitor schemewise
and State-wise releases for about 1,000 Central Plan and centrally sponsored schemes
in 2008-09; Concurrent evaluation started by some ministries to be supplemented by
independent evaluations conducted by research institutions.
BUDGET ESTIMATES
Plan Expenditure estimated at Rs.243,386 crore.
Non-Plan Expenditure estimated at Rs.507,499 crore.
Revenue deficit for 2007-08 to be 1.4 per cent (against a BE of 1.5 per cent) and the fiscal
deficit to be 3.1 per cent (against a BE of 3.3 per cent); Revenue receipts of Central
Government for 2008-09 projected at Rs.602, 935 crore and revenue expenditure at
Rs.658,119 crore; Revenue deficit for 2008-09 estimated at Rs.55,184 crore, which amounts
to 1.0 per cent of GDP; Fiscal deficit for 2008-09 estimated at Rs.133,287 crore which is 2.5
per cent of GDP; elimination of Revenue Deficit may need one more year; because of the
conscious shift in expenditure in favour of health, education and the social sector.
Thirteenth Finance Commission to be requested to revisit the roadmap for fiscal adjustment
and suggest a suitably revised roadmap, after the obligations on account of the Sixth Central
Pay Commission become clear.
TAX PROPOSALS
Tax to GDP ratio that was 9.2 per cent in 2003-04, set to rise to 12.5 per cent at the end of
2007-08.
Set to achieve the Budget Estimates of indirect taxes and exceed the Budget Estimates of
direct taxes.
Indirect Taxes
Customs duties
No change in the peak rate of customs duty.
Customs duty on Project Imports to reduce from 7.5 per cent to 5 per cent; 4 per cent special
CVD to be imposed on a few specified projects in the power sector.
Customs duty being reduced on steel melting scrap and aluminium scrap from 5 per cent to
nil.
Customs duty to be reduced from 10 per cent to 5 per cent on certain specified life saving
drugs and on the bulk drugs used for the manufacture of such drugs. They are also being
exempted from excise duty or countervailing duty.
Customs duty is being reduced on vitamin premixes and mineral mixtures from 30 per cent to
20 per cent and on phosphoric acid from 7.5 per cent to 5 per cent to reduce cost of
manufacture of dairy and poultry feeds
Customs duty being reduced on bactofuges from 7.5 per cent to nil for the benefit of dairy
industry and to increase shelf life of milk
Specified parts of set top boxes and specified raw materials for use in the IT/ electronic
hardware industry to be exempted from customs duty.
Customs duty ! on convergence products to be reduced from 10 per cent to 5 per cent to
establish parity between devices used in the information/ communication sector and the
entertainment sector
Customs duty being reduced on specified machinery from 7.5 per cent to 5 per cent to
provide fillip to the manufacture of sports goods; duty also being exempted on specified raw
materials for sports goods.
Customs duty to be exempted on rough cubic zirconia and being reduced on polished cubic
zirconia from 10 per cent to 5 per cent, in order to encourage value addition and exports by
gem and jewellery industry; Customs duty on rough coral being reduced from 10 per cent to 5
per cent.
Customs duty removed on helicopter simulators to facilitate training of helicopter pilots
Customs duty reduced on crude and unrefined sulphur from 5 per cent to 2 per cent, in order
to support domestic fertiliser production
Customs duty exemption is proposed to be withdrawn on naphtha for use in the manufacture
of polymers in order to correct price distortions and revenue losses. Naphtha for use in the
manufacture of polymers will be subjected to normal rate of 5 per cent. Naphtha imported for
the production of fertilisers will continue to be exempt from import duty.
Export duty on chrome being increased from Rs.2,000 per metric tonne to Rs.3,000 per
metric tonne in order to conserve and make it available for value added manufacture in India.
Excise duty
General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give a
stimulus to the manufacturing sector.
Excise duty on all goods produced in the pharmaceutical sector reduced from 16 per
cent to 8 per cent.
Excise duty reduced on buses and their chassis from 16 per cent to 12 per cent.
Excise duty reduced on small cars from 16 per cent to 12 per cent and on hybrid cars
from 24 per cent to the general revised rate of 14 per cent.
Excise duty reduced ! on two wheelers and three wheelers from 16 per cent to 12 per
cent.
Excise duty to be reduced on paper, paper board and articles made therefrom
manufactured out of non-conventional raw materials by units not having an attached
bamboo/wood pulp making plant from 12 per cent to 8 per cent with a further reduction
on clearances up to 3,500 MT from 8 per cent to nil. Excise duty on certain varieties of
writing, printing and packing paper is to be reduced from 12 per cent to 8 per cent.
Excise duty is to be reduced from 16 per cent to nil on a few mass consumption items
including composting machines, wireless data cards, packaged coconut water, tea and
coffee mixes, and puffed rice.
Excise duty reduction from 16 per cent to 8 per cent on a few more items including water
purification devices, veneers and flush doors, sterile dressing pads etc,. specified
packaging material and breakfast cereals.
Anti AIDS ! drug, Atazanavir, as well as bulk drugs for its manufacture are to be
exempted from excise duty.
Excise duty being exempted on end-use basis, on refrigeration equipment (consisting of
compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration) utilising
power of 50 KW and above.
Excise duty rates on bulk cement and packaged cement brought on par; bulk cement to
attract excise duty of Rs.400 per Metric Tonne or 14 per cent ad valorem, whichever is
higher; cement clinkers excise duty at Rs.450 per Metric Tonne.
Excise duty being increased on packaged software from 8 per cent to 12 per cent,
bringing at par with customised software attracting a service tax of 12 per cent.
Excise duty on both filter and non-filter cigarettes brought on par by applying higher rates
on non-filter cigarettes.
Ad valorem part of the excise duty on unbranded petrol and unbranded diesel being
abolished and replaced by an equivalent specific duty of Rs.1.35 per litre; there will be
only a specific duty of Rs.14.35 per litre on unbranded petrol and Rs.4.60 per litre on
unbranded diesel; there will be no impact on retail prices.
NCCD of 1 per cent removed on polyester filament yarn and the levy shifted to cellular
mobile phones.
Service tax
Four services brought under service tax net namely, asset management service provided
under ULIP, services provided by stock/commodity exchanges and clearing houses; right to
use goods, in cases where VAT is not payable; and customized software, to bring it on par
with packaged software and other IT services.
Threshold limit of exemption for small service providers increased from Rs.8 lak hsper year
to Rs.10 lakh per year; about 65,000 small service providers go out of the tax net.
Direct Taxes
Threshold limit of exemption from personal income tax in the case of all assesses increased
to Rs.150,000. The slabs and rates of tax are :
o Up to Rs.150,000 NIL
o Rs.150,001 to Rs.300,000 10 per cent
o Rs.300,001 to Rs.500,000 20 per cent
o Rs.500,001 and above 30 per cent
In case of a woman assessee, the threshold limit increased from Rs.145,000 to Rs.180,000;
for a senior citizens, the threshold limit increased from Rs.195,000 to Rs.225,000.
No change in the corporate income tax rates.
No change in the rate of surcharge.
Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account added to the
basket of saving instruments under Section 80C of the Income Tax Act.
Additional deduction of Rs.15,000 allowed under Section 80D to an individual paying medical
insurance premium for his/her parent or parents.
Income Tax Act to be amended to provide that reverse mortgage would not amount to
"transfer"; and the stream of revenue received by the senior citizen would not be "income".
Tax income arising from saplings or seedlings grown in a nursery exempted.
Business of production of seeds and manufacture of agricultural implements added to the list
of companies allowed weighted deduction of 150 per cent on any expenditure on in-house
scientific research.
Benefit of amortisation of certain preliminary expenses under Section 35D allowed to
assessees in the services sector.
Corporate debt instruments issued in demat form and listed on recognised stock exchanges
exempted from TDS.
Crèche facilities, sponsorship of an employee-sportsperson, organising sports events for
employees and guest houses excluded from the purview of FBT.
Parent company allowed to set off the dividend received from its subsidiary company against
dividend distributed by the parent company; provided that the dividend received has suffered
DDT and the parent company is not a subsidiary of another company.
Insert a new sub-section (11C) in Section 80-IB to grant a five year tax holiday to hospitals
located in any place outside the urban agglomerations especially in tier 2 and tier-3 towns;
this window will be open for the period April 1, 2008 to March 31, 2013.
Five year holiday from income tax being granted to two, three or four star hotels established
in specified districts having UNESCO-declared 'World Heritage Sites'; the hotel should be
constructed and start functioning during the period April 1, 2008 to March 31, 2013.
Coir Board included in Section 10(29A) and exempted from income tax.
Rate of tax on short term capital gains under Section 111A & Section 115AD increased to 15
per cent.
STT paid to be treated like any other deductible expenditure against business income; Levy
of STT, in the case of options to be only on premium, where the option is not exercised;
liability to be on the seller; where the option is exercised, levy to be on the settlement price
and the liability on the buyer; no change in the present rates.
Commodities Transaction Tax (CTT) to be introduced on the same lines as STT on options
and futures.
Law being amended to exclude entities carrying on regular trade, commerce or business or
providing services in relation to any trade, commerce or business and earning incomes from
claiming that their purposes also fall under "charitable purpose"; Genuine charitable
organisations not to be affected in any way.
Banking Cash Transaction Tax (BCTT) being withdrawn with effect from April 1, 2009.
CST and a Roadmap towards GST
Central Sales Tax rate being reduced from 3 per cent to 2 per cent from April 1, 2008.
Roadmap for Goods and Service Tax being prepared for introduction of GST from April 1,
2010.
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