Policy >> Union Budget Highlights 2010-11

Overview of the Economy

• India among the first few countries in the world to implement a broad-based counter-cyclic policy package to respond to the negative fallout of the global slowdown.
• The Advance Estimates for Gross Domestic Product (GDP) growth for 2009-10 pegged at 7.2 per cent. The final figure expected to be higher when the third and fourth quarter GDP estimates for 2009-10 become available.
• The growth rate in manufacturing sector in December 2009 was 18.5 per cent – the highest in the past two decades.
• A major concern during the second half of 2009-10 has been the emergence of double digit food inflation. Government has set in motion steps, in consultation with the State Chief Ministers, which should bring down the inflation in the next few months and ensure that there is better management of food security in the country.

Consolidating Growth

Tax refoms

• Direct Tax Code (DTC) – Government will be in a position to implement the DTC from April 1, 2011.
• Centre will endeavour to introduce GST by April, 2011

Improving Investment Environment

Foreign Direct Investment

• Number of steps taken to simplify the FDI regime.
• Methodology for calculation of indirect foreign investment in Indian companies has been clearly defined.
• Complete liberalisation of pricing and payment

Exports

Foreign Direct Investment

• Extension of existing interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.

Infrastructure

• Rs 1,73,552 crore provided for infrastructure development which accounts for over 46 per cent of the total plan allocation.
• Allocation for road transport increased by over 13 per cent from Rs. 17,520 crore to Rs 19,894 crore.
• Rs 16,752 crore provided for Railways, which is about Rs.950 crore more than last year.

India Infrastructure Finance Company Limited (IIFCL)

• IIFCL’s disbursements are expected to touch Rs 9,000 crore by end March 2010 and reach around Rs 20,000 crore by March 2011.

Energy

• Plan outlay for the Ministry of New and Renewable Energy increased by 61 per cent from Rs.620 crore in 2009-10 to Rs.1,000 crore in 2010-11.

Environment and Climate change

• National Clean Energy Fund for funding research and innovative projects in clean energy technologies to be established.

Inclusive Development

• The spending on social sector has been gradually increased to Rs.1,37,674 crore in 2010-11, which is 37% of the total plan outlay in 2010-11.
• Another 25 per cent of the plan allocations are devoted to the development of rural infrastructure.

Education

• Plan allocation for school education increased by 16 per cent from Rs.26,800 crore in 2009-10 to Rs.31,036 crore in 2010-11.
• In addition, States will have access to Rs.3,675 crore for elementary

Micro, Small & Medium Enterprises

• High Level Council on Micro and Small Enterprises to monitor the implementation of the recommendations of High-Level Task Force constituted by Prime Minister.
• Allocation for this sector to be increased from Rs.1,794 crore to Rs.2,400 crore for the year 2010-11.
• The corpus for Micro-Finance Development and Equity Fund doubled to Rs.400 crore in 2010-11.

Unorganised Sector

Skill development

• National Skill Development Corporation has approved three projects worth about Rs 45 crore to create 10 lakh skilled manpower at the rate of one lakh per annum.
• An extensive skill development programme in the textile and garment sector to be launched by leveraging the strength of existing institutions

Strengthening Transparency & Public Accountabilty

• Rs 1,900 crore allocated to the Unique Identification Authority of India (UIDAI) for 2010-11. UIDAI will be able to meet its commitments of issuing the first set of UID numbers in the coming year

Security and Justice

• Allocation for Defence increased to Rs. 1,47,344 crore including Rs 60,000 crore for capital expenditure.

Budget Estimates 2010-11

• The Gross Tax Receipts are estimated at Rs. 7,46,651 crore. The Non Tax Revenue Receipts are estimated at Rs. 1,48,118 crore.
• The total expenditure proposed in the Budget Estimates is Rs. 11,08,749 crore, which is an increase of 8.6 per cent over last year.
• The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs. 3,73,092 crore and Rs. 7,35,657 crore respectively. While there is 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the BE of previous year.
• Fiscal deficit for BE 2010-11 at 5.5 per cent of GDP, which works out to Rs.3,81,408 crore.

PART B Tax Proposals

Direct Taxes

• Income tax slabs for individual taxpayers to be as follows
  

  Income upto Rs 1.6 lakh	Nil
  Income above Rs 1.6 lakh and upto Rs. 5 lakh	10 per cent
  Income above Rs.5 lakh and upto Rs. 8 lakh	20 per cent
  Income above Rs. 8 lakh	30 per cent

• Deduction of an additional amount of Rs. 20,000 allowed, over and above the existing limit of Rs.1 lakh on tax savings, for investment in long-term infrastructure bonds as notified by the Central Government
• Besides contributions to health insurance schemes which is currently allowed as a deduction under the Income-tax Act, contributions to the Central Government Health Scheme also allowed as a deduction under the same provision.
• Current surcharge of 10 per cent on domestic companies reduced to 7.5 per cent.
• Rate of Minimum Alternate Tax (MAT) increased from the current rate of 15 per cent to 18 per cent of book profits.
• To further encourage R&D across all sectors of the economy, weighted deduction on expenditure incurred on in-house R&D enhanced from 150 per cent to 200 per cent. Weighted deduction on payments made to National Laboratories, research associations, colleges, universities and other institutions, for scientific research enhanced from 125 per cent to 175 per cent.
• Payment made to an approved association engaged in research in social sciences or statistical research to be allowed as a weighted deduction of 125 per cent. The income of such approved research association shall be exempt from tax.
• Limits for turnover over which accounts need to be audited enhanced to Rs. 60 lakh for businesses and to Rs. 15 lakh for professions.
• Limit of turnover for the purpose of presumptive taxation of small businesses enhanced to Rs. 60 lakh.
• Computation of exempted profits in the case of units in Special Economic Zones (SEZs) extended to cover from 2006-07

Indirect Taxes

• Rate reduction in Central Excise duties to be partially rolled back and the standard rate on all non-petroleum products enhanced from 8 per cent to 10 per cent ad valorem.
• Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each.

Environment

• Provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units and also exempt them from Central Excise duty. Ground source heat pumps used to tap geo-thermal energy to be exempted from basic customs duty and special additional duty.
• Exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty.
• Central Excise duty on LED lights reduced from 8 per cent to 4 per cent at par with Compact Fluorescent Lamps.
• To remedy the difficulty faced by manufacturers of electric cars and vehicles in neutralising the duty paid on their inputs and components, a nominal duty of 4 per cent on such vehicles imposed. Some critical parts or sub-assemblies of such vehicles exempted from basic customs duty and special additional duty subject to actual user condition. These parts would also enjoy a concessional CVD of 4 per cent.
• To encourage the domestic manufacture of mobile phones accessories, exemptions from basic, CVD and special additional duties are now being extended to parts of battery chargers and hands-free headphones. The validity of the exemption from special additional duty is being extended till March 31, 2011.

Medical Sector

• Uniform, concessional basic duty of 5 per cent, CVD of 4 per cent with full exemption from special additional duty prescribed on all medical equipments. A concessional basic duty of 5 per cent is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty.

Infotainment

• To address the difficulties experienced by film industry in importing digital masters of films for duplication or distribution loaded on electronic medium vis-avis those imported on cinematographic film, owing to a differential customs duty structure, customs duty to be charged only on the value of the carrier medium. The same dispensation would apply to music and gaming software imported for duplication. In all such cases the value representing the transfer of intellectual property rights would be subjected to service tax.
• Provide project import status at a concessional customs duty of 5 per cent with full exemption from special additional duty to the initial setting up “Digital Head End” equipment by multi-service operators.

Other Proposals

• Basic customs duty on one of key components in production of micro-wave ovens, namely magnetrons, reduced from 10 per cent to 5 per cent.
• Value limit of Rs. 1 lakh per annum on duty-free import of commercial samples as personal baggage enhanced to Rs. 3 lakh per annum.
• Outright exemption from special additional duty provided to goods imported in a pre-packaged form for retail sale. This would also cover mobile phones, watches and ready-made garments even when they are not imported in pre-packaged form. The refund-based exemption is also being retained for cases not covered by the new dispensation.
• Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4 per cent;
• Reduction in central excise duty on corrugated boxes and cartons from 8 per cent to 4 per cent;
• Proposals relating to customs and central excise are estimated to result in a net revenue gain of Rs. 43,500 crore for the year.

Service Tax

• Rate of tax on services retained at 10 per cent to pave the way forward for GST.
• Certain services, hitherto untaxed, to be brought within the purview of the service tax levy. These to be notified separately.
• Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy by making necessary changes in the definition of export of services and procedures.

Important Notifications

Customs:
Notification no. 16/2010-Cus dtd. 27 Feb 2010
Notification no. 18/2010-Cus dtd. 27 Feb 2010
Notification no. 21/2010-Cus dtd. 27 Feb 2010
Notification no. 22/2010-Cus dtd. 27 Feb 2010
Notification no. 23/2010-Cus dtd. 27 Feb 2010
Notification no. 27/2010-Cus dtd. 27 Feb 2010
Notification no. 28/2010-Cus dtd. 27 Feb 2010
Notification no. 29/2010-Cus dtd. 27 Feb 2010
Notification no. 30/2010-Cus dtd. 27 Feb 2010

Customs:
Notification no. 12/2010-CE dtd. 27 Feb 2010
Notification no. 17/2010-CE dtd. 27 Feb 2010

Amendment in Notification 25/99 – Notf No. 20/2010 CUS

Inputs for Connectors (Tariff Heading 85369090) – Import duty 0%

S. No.	Inputs	Tariff Heading
1	Palladium Electroplating Salt	38249021

Inputs for Electromechanical Assembly Relays & Switches (Tariff Heading 85364100) – Import duty 0%

S. No.	Chapter	HSN Code	Item	End Product	HSN Code
1	71	71069210	Silver Bronze Strips/Coils	Electromechanical Assy ----- Relays/switches	85364100/85365090
2	74	74091100	Copper Strips/coils/sheets	Electromechanical Assy ----- Relays/switches	85364100/85365090
3	74	74099000	Copper nickel alloy or Other alloys of copper in strip/coil/sheets	Electromechanical Assy ----- Relays/switches	85364100/85365090
4	72	72201290	Stainless steel strips	Electromechanical Assy ----- Relays/switches	85364100/85365090

Inputs for IC Sockets (Tariff Heading 85361090) – Import duty 0%

S. No.	Inputs	Tariff Heading
1	Plastic Powder PBT (Poly Brominated Terepthalate)	39079920
2	PCT (Poly Chlorinated Terphenyls)	34049033
3	Stanyl	39089090

Inputs for Aluminum Electrolytic Capacitor (HSN 8504)

S. No.	Inputs	Tariff Heading
1	Boric Acid	2528 9010
2	Mono Ethylene Glycol	2905 3100
3	Marking Foil/ Stamping Foil	3212 1000
4	Liquid Paraffin	2712 20 90

Amendment in Notification 21/2002 - Notf No. 22/2010 CUS

1. Modification in Sl. No. 7 of General Exemption 100B for Notf.No. 25/2002.

S. No.	Description of imported Goods	Description of finished Goods
7	Automatic/Semi Automatic Assembling Machine	Connectors; Relays of contact rating upto 7 amperes; resistors; Potentiometer; EMI/RFI Filters; LED indicator Lamps and Display Systems.

2. Modification in Sl. No. 2 and Sl No. 11 of General Exemption 100B for Notf. No. 25/2002.

S. No.	Description of imported Goods	Description of finished Goods
2	High vacuum frequency adjusters; sema sealers; high vacuum base plating systems; lapping machines; crystal blank sorter; ie bonder; pick and place machines; IR reflow ovens; tape and reet packing systems; SMD oscillator ATE (Automatic test equipment); SMD crystal ATE (Automatic test equipment); X-ray Goniometer/ Piezo Goniometer; slurry saws	“Crystals; Mounted Piezo Electric Crystals oscillators; capacitors; EMI/RFI filters; LED indicator Lamps and display systems”
11	Pick and place machines; automatic assembly line including welding, soldering, encapsulation, filling and drying	Variable resistors; quartz crystals; Mounted Piezo Electric Crystals; PCB assembly
41	Temperature test system or oscillator test system; Cathode Ray Oscilloscope/ Oscilloscopes; Frequency Counter; Spectrum Analyzers; AC/DC Power supplies; LCR Bridges	Mounted PIezo Electric Crystals