Indian Fiscal Budget 1997-98: Full Text

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Indirect Tax Proposals

  1. Now, I turn to my indirect tax proposals.

  2. In relation to indirect taxes the CMP has stipulated: "The progress towards the goal of bringing India's tariffs in accord with world levels will be measured and calibrated."

  3. On more than one occasion, I have stated that we would achieve the average level of tariffs prevalent in ASEAN countries by the turn of century. This will give time to Indian industry to adjust to these changes. This year's proposals should be seen in this background.

  4. I propose to reduce the peak rate of customs duty from 50% to 40%.

  5. High levels of customs duties on capital goods are inconsistent with our policy of attracting the best technology. Greenfield investments in large projects should be globally competitive. I have tried to harmonise the needs of Indian industry with the requirements of the capital goods sector. I, therefore, propose a modest reduction in duty on capital goods from 25% to 20%. This reduced rate of 20% will also apply to project imports. Over the next two to three years these rates would need to be further adjusted to conform to levels prevalent in other developing Asian countries.

  6. I also propose to exempt plans, designs and drawings from the levy of customs duty.

  7. The customs duty on several inputs for the steel industry is being reduced. I propose to reduce the duty on coking coal (of ash content below 12%) from 5% to 3% and on coking coal of higher ash content, as well as coke, from 20% to 10%. I also propose to reduce the duty on nickel from 20% to 10%, on ferro alloys from 25% to 20% and on re-rollable steel scrap from 30% to 20%. All these measures should benefit the steel industry to reduce its cost of production.

  8. Iron and steel products at present generally attract customs duty at 30%. I do not propose to make any major changes in the duty structure this year. However, I propose to reduce the duty on Cold Rolled Coils of iron and steel from 30% to 25% to help the engineering industry. I further propose to reduce the duty on ships brought for breaking from 10% to 5% and on pig iron from 20% to 10%.

  9. I propose to reduce the duty on non-coking coal from 20% to 10%. This will help the power sector.

  10. Chemicals constitute vital inputs for several down- stream industries including the small scale sector. I propose to reduce the duty on organic and inorganic chemicals from 40% to 30% . I also propose to make the following reductions on certain essential chemicals:
    • On linear alkylbenzene, from 30% to 20%.
    • On methanol, from 30% to 20%.
    • On naphthalene, from 30% to 20%.
    • On phenol, from 30% to 25%.
    • On catalysts, from 30% to 25%.


  11. I also propose to reduce the customs duty on dyes, pigments, paints and varnishes, glues, enzymes and modified starches from 40% to 30%. These reductions will significantly benefit our textile industry.

  12. Mr. Speaker, Sir, the scheduled dismantling of quantitative restrictions under the Multi Fibre Agreement will expose all textile exporting countries to stiff competition. The Ministry of Textiles have created a "Technology Upgradation Fund" for both the textile and jute industries to enhance the competitive efficiency of these sectors. Our textile industry has, therefore, to upgrade its technologies in the shortest possible time. Last year, I had reduced the customs duty on several kinds of textile machinery to 10%. In order to improve the quality of our garments for exports, this year I propose to add some more processing machines to this category. However, to mitigate any adverse impact on domestic manufacturers, I have decided to allow them to import the components and parts of these machinery at a concessional duty of 10%.

  13. As a relief to the woollen textile industry, I propose to reduce the import duty on apparel grade wool from 25% to 20%, on wool waste from 30% to 20% and on woollen and synthetic rags from 30% to 25%. On flax fibre, I propose to reduce the duty from 30% to 20%.

  14. In order to conserve our forest resources, I propose to fully exempt wood logs, fuel wood, wood chips, etc. from customs duty.

  15. The spread of "Information Technology" has radically altered conventional wisdom on growth strategies. I propose several measures to encourage this industry and to reduce costs. These include:
    • Full exemption to computer software.
    • Reduction of duty on computer parts, other than populated printed circuit boards, from 20% to 10%.
    • Reduction of duty on cartridge tape drive and digital video disc drive from 20% to 10%.
    • Reduction of duty on populated printed circuit boards from 30% to 20%.
    • Reduction of duty on integrated circuits from 20% to 10%.
    • Reduction of duty on colour monitor tubes from 20% to 10%.
    • Reduction of duty on colour picture tubes from 35% to 30%.
    • Reduction of duty on parts of cellular telephones and pagers from 30% to 20%.
    • Reduction of duty on telecom equipment from 40% to 30% and on their parts from 30% to 20%.


  16. Ham operators are presently eligible to import specified equipment upto a value of Rs.50,000 at a concessional rate of duty. I propose to raise this limit to Rs.75,000.

  17. I propose to reduce the duty on watch parts and movements from 50% to 25% and on watch cases of base metals from 50% to 30%. I also propose to reduce duty on horological materials from 20% to 10%. This will help our watch industry to further enhance their quality.

  18. We are all concerned about the menace of growing pollution. In order to help reduce the cost of CNG kits, I have decided to reduce the customs duty on such kits and their parts from 10% to a modest 5%. Similarly, I propose to reduce the customs duty sharply on catalytic converters and their parts to 5% from the existing rate of 25%.

  19. To improve the quality of medical care, I propose to reduce the import duty on medical equipment from 30% to 20%; on linear accelerators of 15 MeV and above used for cancer treatment from 10% to 0%; and on ophthalmic blanks for making spectacle lenses from 50% to 20%.

  20. To promote tourism, I propose to reduce the import duty on specified equipment required for hotels from 35% to 25% and on specified speciality food items used by foreign tourists from 50% to 25%.

  21. I also propose to give some relief to the film and photographic industry by reducing the import duty on cine films and other photographic films from 30% to 25% and on parts of cameras from 50% to 25%.

  22. I propose to reduce the customs duty on baggage from 60% to 50%.

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