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Sinha fast forwards India's entry into global tariff structure by two years

Finance Minister Yashwant Sinha has announced that India would adhere to the global tariff structure two years before its commitment to do so in 2005. He also unveiled major tax concessions for the information technology sector.

Moving the Finance Bill in the Lok Sabha today, Sinha said his decision relating to the global tariff structure would accelerate the process of globalisation of the Indian economy.

Observers said the move towards global tariff structure may be in response to the negative reaction of the international community to the nuclear tests in May and the Bharatiya Janata Party government's pro-domestic industry policy.

The Finance Minister announced that there will be no gift tax on gift of computers, exemption of withholding tax on royalty payable in respect of transmission of IT data, extension to the IT sector of withholding tax on interest on external commercial borrowings and measures which will enable the IT sector to avail of the benefits of 100 per cent deduction on their export earnings.

Sinha hoped that the series of proposals announced for the information technology would lead to substantial growth in this important sector from the current level of more than 20 per cent to over 50 per cent.

He said never before has any government announced such a major relief for the information technology sector. Denying the allegations that exemption of gift tax on computers would lead to misuse, he said it would help the millions of schools and institutions to get these computers as gifts.

He said the series of concessions announced by him today, were part of Jaswant Singh Committee Task Force recommendations on information technology and software development. These concessions will give a major boost to IT sector and provide information technology a pro-people and pro-development thrust.

He hoped the technology will reach masses in rural areas and small towns and will give the country significant place in emerging knowledge-driven global economy.

Replying to a question on the permanent account number for income tax payers, he said there will be no harassment to any one for their business transactions including purchase of property.

Sinha said the benefits of Section 80 are proposed to be extended to supporting developers of computers software.

He said depreciation of IT products is to be allowed at the rate of 60 per cent looking to the high rate of obsolescence of such products.

He also announced some concessions in the area of indirect taxes of IT industry.

He said computer software is already fully exempt from both customs and excise duties. In order to further speed up the spread of information technology, he announced exemption of all software used in IT sector from customs duty.

He also proposed to exempt from the levy of customs duty computers and computer peripherals imported under schemes for 100 per cent export oriented units, export processing zones and software technology parks when donated to recognised educational institutions, government organisations and registered charitable hospitals after use for a period of two years from the date of import.

Sinha said these changes will be given effect from Thursday and the notifications issued in this regard will be laid on the table of the House in due course.

He said he had received representations on many indirect proposals. There was a request for example to exempt processed food items. Hours and hours of his time had been taken to convince him why neither sweets nor salted products could be taxed. Similarly, people tried to convince him why some products could not be subjected to excise and some others to customs duty.

The makers of traditional Indian sweets and snacks have drawn wide support from members of the house, he said.

He said he had received a number of suggestions from members of Parliament, the standing committee of Parliament, trade associations, various chambers of commerce and individual taxpayers and through the media.

The issues relating to the status of the ''not ordinarily resident'', withholding of tax on external commercial borrowings, taxing of gifts as income, exemption of income on educational and medical institutions, exemption of income of infrastructure capital funds, determination of capital gains on the basis of circle rates for stamp duty, method of valuation of inventory and many other proposals in the Bill have been the subject matter of intense debate within and outside the country, he said.

UNI