Indirect Taxes - Indian Budget 2006 – 2007 (119 - 129)

Indirect Taxes

119. I shall begin with my proposals on indirect taxes. Firstly, customs duties.

120. In line with the Government’s policy of reducing customs duties, I propose to reduce the peak rate for non-agricultural products from 15 per cent to 12.5 per cent. I believe that we are now only a short distance away from East Asian rates.

121. As the peak rate comes down, there is a need to reduce the duty on raw materials and intermediates.

122. The duty on primary steel is at 5 per cent. I propose to reduce the duty on alloy steel and primary and secondary non-ferrous metals from 10 per cent to 7.5 per cent. This will also be the rate of duty for ferro alloys.

123. In 2004-05, in view of the high international prices of steel, I had reduced the import duty on steel melting scrap to zero. With prices of steel coming down, I propose to restore the duty to 5 per cent and bring it on par with primary steel.

124. The duty on mineral products is now 15 per cent. I propose to reduce it to 5 per cent, with a few exceptions.

125. I also propose to reduce the duty on ores and concentrates from 5 per cent to 2 per cent.

126. Refractories attract a duty of 10 per cent. A number of materials required for manufacture of refractories are also at 10 per cent or higher rates. I propose to reduce these duties to 7.5 per cent.

127. Basic inorganic chemicals are crucial raw materials. I propose to reduce the duty from 15 per cent to 10 per cent. On basic cyclic and acyclic hydrocarbons and their derivatives, I propose to bring down the rate to 5 per cent. I also propose to reduce the duty on catalysts from 10 per cent to 7.5 per cent.

128. Plastics are important raw materials. Hence, I propose to reduce the duty on major bulk plastics like PVC, LDPE and PP from 10 per cent to 5 per cent. Simultaneously, the duty on naptha for plastics will be reduced to nil.

129. I propose to reduce the duty on styrene, EDC and VCM which are raw materials for plastics to 2 per cent.