The Vijay Kelkar task force on direct and indirect taxes, submitted its report to Finance Minister Jaswant Singh on Friday.
The panel's report is yet to be accepted by the government. If accepted, the proposals are likely to be implemented in the Union Budget for 2003-04 (April-March) to be unveiled in late February.
Following are highlights of the panel's direct and indirect tax proposals:
INDIRECT TAXES:
Customs duty:
- Multiplicity of levies must be reduced. There should be only three types of duties: a basic customs duty, an additional duty of customs and anti-dumping/safeguard duties.
- Zero per cent duty for life-saving drugs and equipment, defence and security related goods and imports by the Reserve Bank of India.
- Ten per cent duty for raw material, inputs and intermediate goods and 20 per cent for consumer durables by 2004-05.
- By 2006-07, five per cent duty for basic raw materials such as coal, ores and concentrates, xylenes; eight per cent for intermediate goods; 10 per cent for finished goods other than consumer durables; and 20.0 per cent for consumer durables.
- Nominal reduction in duty on motor vehicles to 50 per cent from 60. Import duty on second hand cars may continue at existing levels.
- Exemption for cellphones from countervailing duty may be withdrawn but basic import duty may be cut to zero in 2003-04.
- Eight per cent duty on crude oil, 15 per cent on petroleum products by 2003-04 and five per cent on crude oil and 10 per cent on petroleum products by 2004-05.
- Higher duty of up to 150 per cent for specified agriculture products.
- Duty cuts should be in stages of five per cent each year.
Excise duty:
- Zero per cent duty for life-saving drugs and equipment, security items, food items and agricultural products.
- Six per cent duty for processed food products and matches.
- Twenty per cent rate for motor vehicles, airconditioners and aerated water.
- Separate rates for tobacco products and their substitutes.
- Bulk tea may be exempt from excise duty.
- Central excise duty on kerosene may be raised to one rupee a litre.
- Warehousing facility for petroleum products should be withdrawn.
DIRECT TAXES:
- Three personal income tax tiers to be replaced by two tiers. Income between Rs 100,000-400,000 will be subjected to 20 per cent tax. All income above 400,000 will be subjected to tax at 30 per cent.
- Dividends received from Indian companies will be fully exempt.
- Long term capital gains on listed equity will be fully exempt.
- Standard deduction for salaried taxpayers will be reduced to nil. However, exemption for conveyance allowance subject to a ceiling of Rs 9,600 will continue.
- Interest subsidy of two percent for housing loans up to 500,000 to all borrowers.
- Reduction in corporate tax rate from existing levels of 36.75 per cent to 30 per cent for domestic firms and 35 per cent for foreign companies over a period of three years.
- Elimination of Minimum Alternate Tax under section 115JB of the Income Tax Act.