Edible oils, SEZs gain most as Budget gets green light

Finance minister Jaswant Singh on Wednesday distanced the Centre from value-added taxation in states, salvaged the budget''s textile package with minor amendments, avoided major changes in the official amendments to the Finance Bill, slashed import duty on refined edible oil to fight inflation, and offered more income tax concessions for special economic zones and offshore banking units.
During the debate on the Finance Bill ''03, Mr Singh announced limiting the long-term capital gains tax exemption — on listed equities purchased between March 1, ''03 and March 1, ''04 and sold after a lapse of one year — to equity shares appearing in the list of BSE 500 as on March 1, ''03.
The transactions of purchase and sale should be on a recognised stock exchange in India. Tightening of norms has also been proposed to prevent misuse of the provision to launder money by showing fake transactions in thinly-traded shares.
The capital gains tax exemption window has been widened with the government now extending these benefits to equity shares allotted through a public issue on or after March 1, ''03 and listed in a recognised stock exchange before March 1, ''04.
The government had intended to do this during this year''s Budget as part of the effort to boost the capital markets. However, it slipped out while drafting the budget, officials said.
Income tax exemption for capital gains accruing to political parties and tax exemption on income earned from single premium policies like Bima Nivesh prior to April 1, ''03 figured among the amendments to direct tax proposals.
Fresh policies taken after April 1, ''03 where the premium exceeds 20% of the actual sum assured will not qualify for the tax exemption. Single premium policies have been viewed more as an investment instrument rather than a risk cover product.
Mr Singh made it clear that there would be no re-opening of past cases for income tax scrutiny in the textile sector. Small powerloom owners operating up to 8-10 looms would be fully exempted from duty and would also be given the option of registering or opting out of the Cenvat chain.
Unprocessed fabrics up to the first clearance of Rs 20 lakh, woven by powerlooms with an annual turnover below Rs 25 lakh, would qualify for full excise exemption.
Similarly, the waiver would also apply to unbranded, woven and knitted readymade garments up to the first clearance of Rs 25 lakh, with an annual turnover not exceeding Rs 30 lakh.
Hand-processed fabrics will have the benefit of a differential or lower excise duty over fabrics processed completely with the aid of power and steam.
The finance minister also announced a shift in the duty structure on edible oil from ad valorem to specific duty. The Budget proposal to levy an 8% duty on branded refined edible oil and vanaspati packed in sealed containers for retail sale had resulted in an unwarranted shift from branded to unbranded edible oil to avoid duty payment, besides impacting prices.
A specific rate of Rs 1 per kg on refined edible oil and Rs 1.25 per kg on vanaspati will replace the ad valorem rate.
Mr Singh also announced a reduction in the import duty on refined palm oil from 85% to 70%. Refined palm oil would also be exempt from the 4% special additional duty of customs.
The move brings down the duty differential between refined palm oil and crude palm oil to 5%, and coupled with changes in the excise duty structure is expected to have a sobering impact on prices.
The finance minister, however, acceded fully to the commerce ministry''s demand for more sops to SEZs. The package covers re-investment allowance of 50% of the profits ploughed back by SEZ units into business, easing of restrictions on carry-forward losses and unabsorbed depreciation of SEZ undertakings and export status to sales from DTA to units set up in SEZ. Such sales will enjoy 80 HHC benefits for one year.
More importantly, 100% exemption has been given to offshore banking units set up in SEZs for three years and 50% tax exemption for the next two years.