NEW DELHI, Dec 27 (Reuters) - An Indian government tax panel recommended changes in duty rates on a range of products on Friday aimed at rationalising the indirect and direct tax structure to boost government revenues.
The panel's report is yet to be accepted by the government. If accepted, the proposals are likely to be implemented in the federal budget for 2003/04 (April-March) to be unveiled in late February.
Following are highlights of the panel's direct and indirect tax proposals.
INDIRECT TAXES:
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Customs duty:
* Multiplicity of levies must be reduced. There should be only three types of duties: a basic customs duty, an additional duty of customs and anti-dumping/safeguard duties
* Zero percent duty for life-saving drugs and equipment, defence and security related goods and imports by the Reserve Bank of India
* Ten percent duty for raw material, inputs and intermediate goods and 20 percent for consumer durables by 2004/05
* By 2006/07, five percent duty for basic raw materials such as coal, ores and concentrates, xylenes; eight percent for intermediate goods; 10 percent for finished goods other than consumer durables; and 20.0 percent for consumer durables
* Nominal reduction in duty on motor vehicles to 50 percent from 60. Import duty on second hand cars may continue at existing levels
* Exemption for cellphones from countervailing duty may be withdrawn but basic import duty may be cut to zero in 2003/04
* Eight percent duty on crude oil, 15 percent on petroleum products by 2003/04 and five percent on crude oil and 10 percent on petroleum products by 2004/05
* Higher duty of up to 150 percent for specified agriculture products
* Duty cuts should be in stages of five percent each year
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Excise duty
* Zero percent duty for life-saving drugs and equipment, security items, food items and agricultural products
* Six percent duty for processed food products and matches
* Twenty percent rate for motor vehicles, airconditioners and aerated water
* Separate rates for tobacco products and their substitutes
* Bulk tea may be exempt from excise duty
* Central excise duty on kerosene may be raised to one rupee a litre.
* Warehousing facility for petroleum products should be withdrawn
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Direct Tax:
* Three personal income tax tiers to be replaced by two tiers. Income between 100,000-400,000 rupees will be subjected to 20 percent tax. All income above 400,000 will be subjected to tax at 30 percent
* Dividends received from Indian companies will be fully exempt
* Long term capital gains on listed equity will be fully exempt
* Standard deduction for salaried taxpayers will be reduced to nil. However, exemption for conveyance allowance subject to a ceiling of 9,600 rupees will continue
* Interest subsidy of two percent for housing loans up to 500,000 to all borrowers
* Reduction in corporate tax rate from existing levels of 36.75 percent to 30 percent for domestic firms and 35 percent for foreign companies over a period of three years
* Elimination of Minimum Alternate Tax under section 115JB of the Income Tax Act