IT, telecom to get duty sops ahead of interim Budget

NEW DELHI: Duty sops for power,telecom and information technology are on the cards, with the finance ministryset to announce a slew of indirect tax concessions ahead of the interim budget.
In his interim budget to be presented for thepurpose of a vote on account, finance minister Jaswant Singh is expected tooutline the thrust areas — covering agriculture, power, telecom and the ITsector — where the government has kicked off major initiatives. With theGDP growth projected at 8.4% at the end of the second quarter, the financeminister is set to project an improved fisc.
A full picture for ‘03-04would be available as the government has already firmed up the revisedestimates. Indications are that the government’s fiscal deficit may belower than the budgeted target of 5.6% of the GDP. On the indirect tax front,the government is set to reduce duties on IT and telecom products, in line withthe international commitments, since it has the power to notify changes inindirect tax rates. So, laptops, desktops and other IT gizmos will becomecheaper.
The government, however, does not have the power to notify directtax rates. The rates for direct taxes — including income tax — areprescribed in the Finance Act every fiscal.
In a vote on account, aFinance Bill is also introduced along with the annual financial statement anddemand for grants. But the government continues with the existing tax rates.

Changes can be made only whenthe government tables the second Finance Bill along with the final budget. Theother option to effect a rate change is for the government to take the ordinanceroute.
The vote on account is meant to enable the government meet essentialexpenditures for the first few months of the next financial year. Monies cannotbe withdrawn from or charged to the consolidated fund unless voted for by theParliament. (Do you think Jaswant Singh will remain the Finance Minister after the Lok Sabha polls?)
In anormal budget year too, the government takes a vote on account for two monthssince the entire process beginning with the budget presentation and ending withdiscussions and voting of the demand for grants takes time. However, the budgethas to be passed within 75 days of the date of presentation in order to ratifychanges in indirect tax rates. A vote on account can be taken for a maximum ofsix months since houses of Parliament have to meet within six months.
MrSingh’s predecessor Yashwant Sinha, who presented an interim budget inMarch 1998, took a vote on account for the first four months of 1998-99. Alongwith the interim budget, he presented the demand for grants and the annualfinancial statements for a full financial year, which he later revised whilepresenting the final budget.
The interim budget will also provide thebudget estimates for revenue and expenditure for ‘04-05, although thegovernment has the leeway to revise and finalise these estimates whilepresenting the full budget. The only major difference is that the growthprojections for tax revenues in an interim budget will not factor in the changesin tax rates, unless, of course, the government sets a precedence by changingthe rates in the Finance Bill. On the expenditure front, allocations will bemade to all ministries based on the gross budget support to the plan.