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NEW DELHI: The Government today announced its proposal to
enhance the allocation for e-governance from Rs. 395 crore
in the year 2006-07 to Rs. 719 crore in 2007-2008.
Presenting the Budget proposals in the Lok Sabha today, Finance
Minister P. Chidambaram said the Government had launched an
ambitious programme for e-governance with the objective of
improving efficiency, convenience, accessibility and transparency
in Government functions and take Government services to the
common citizen.
He said the Central Government supports e-governance action
plan at State levels and therefore it was proposed to increase
the allocation for such support from Rs. 300 crore in 2006-07
to Rs. 500 crore in 2007-08.
The Minister also proposed to provide Rs. 33 crore for a
new scheme of manpower development for the software export
industry.
Mr Chidambaram noted that e-filing of corporate returns introduced
this financial year had been a resounding success and until
January 31, 2007, 301,736 returns were electronically filed
by corporates. The Ministry’s analysis showed that ‘the
effective rate of tax paid by all corporates, thanks to numerous
tax concessions and exemptions - several of them well-intended
- was only 19.2 per cent’. He therefore decided to extend
Minimum Alternate Tax (MAT) to income in respect of which
deduction is claimed under sections 10A and 10B of the Income
Tax Act.
MAT had been introduced in 1996-97 for companies with book
profits, and its purpose was to bring about horizontal equity
in taxation.
Extending service tax to renting of immovable property for
use in commerce or business, the Minister excluded residential
properties and land for entertainment.
While bidding goodbye to 200,000 assesses through service
tax proposals, the Minister said he proposed to bring new
assesses into the fold by extending service tax to fields
like the Development and supply of content for use in telecom
and advertising purposes; asset management services provided
by individuals; and
Design services.
The Empowered Committee of State Finance Ministers had agreed
to work with the Central Government to prepare a roadmap for
introducing a national level Goods and Services Tax (GST)
with effect from April 1, 2010.
Keeping in mind the special needs of several sectors and
the interest of the consumers, the Minister mooted a proposal
to raise the exemption limit for small scale industry (SSI)
from Rs.1 crore to Rs. 1.5 crore. The exemption limit for
small service providers was being increased from Rs. 400,000
to Rs. 800,000. While noting that this will mean 200,000 assesses
out of a total of 400,000 assesses will go out of the service
tax net, he said he was happy to give away the revenue loss
of Rs. 800 crore in the interest of the small service provider
and the consumer.
The Minister said the telecommunications industry had repeatedly
requested that the multifarious taxes, charges and fees applicable
to the industry should be unified and a single levy on revenue
should be collected. He had accepted this proposal and proposed
to request the Department of Telecommunications to constitute
a committee to study the present structure of levies and make
suitable recommendations to Government.
He proposed to exempt from service tax all services provided
by technology business incubators to encourage innovation.
Similarly, their incubatees whose annual business turnover
does not exceed Rs. 50 lakhs will be exempt from service tax
for the first three years.
As a measure to encourage small and medium enterprises to
invest and grow, the Minister said the surcharge on income
tax will be removed on all firms and companies with a taxable
income of Rs. One crore or less, benefiting about 1,200,000
firms and companies.
Since VAT (Value Added Tax) had proved to be an unqualified
success and VAT revenues of the implementing States increased
by 13.8 per cent in 2005-06 and by 24.3 per cent in the first
nine months of 2006-07, the next logical step was to phase
out Central Sales Tax (CST) and the Central Government had
reached an agreement with State Governments in this regard.
Consequently, the CST rate will be reduced from 4 per cent
to 3 per cent with effect from April 1, 2007 and Rs. 5,495
crore had been provided for compensation for losses, if any,
on account of VAT and also on account of CST.
Noting that venture capital funds were a useful source of
risk capital for start-up ventures in the knowledge-intensive
sectors, the Minister said it was necessary to limit the tax
benefit to investments made in truly deserving sectors. He
therefore announced that among other industries, information
technology relating to hardware and software development would
be given pass-through status to venture capital funds only
in respect of investments in venture capital undertakings.
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