Polls ahead, so Jaswant stays VAT

While pleasing the traders and farmers in his mini-Budget, Singh also had sops for his own political ilk by exempting income of all political parties from capital gains tax. This was not all: there were sops for textile industries and on edible oil too.

Not forgetting his party’s support base, Singh had something for the middle class as well. He hinted that the government would reconsider the levy of 8 per cent service tax, proposed in his Budget, from July 1 on computer education and tutorials by students.

Not to leave religion out of the politics of the Budget, Singh hinted at exemption from service tax of income of religious places like mandirs, masjids, gurdwaras and churches from leasing of premises for social functions.

Replying to a four-day debate in the Lok Sabha on the Finance Bill, Singh waived interest on all loans to farmers in the 14 drought-affected states. The Minister, however, said that classifying a state as drought-affected was not in his hands.

His speech in the LS was not without its own share of drama. An agitated Shiv Sena member Prakash Paranjpe created a flutter in the House when he staged a dharna in the well, demanding a hike in funds to members under the MPs local area development (MPLAD) scheme.

Singh had some more sops for the middle class as he made a correction and exempted from income tax the income earned on life insurance policies taken before April 1 this year. In his budget speech, he had proposed to withdraw exemption in respect of insurance policies whose premium exceeded 20 per cent of the sum assured in a year.

He also announced that tax would not be deducted at source on interest awarded on accident compensation upto Rs 50,000. In the face of the demand to exempt sportspersons upto the age of 30 from paying income tax, Singh announced deduction of up to Rs 75,000 from the income received as professional fees by all sportsmen participating in games and sporting events.

Responding to the criticism on account of spiralling prices of edible oils, Singh replaced the 8 per cent ad valorem duty of excise on branded edible oils and vanaspati in sealed containers to a flat rate of Re one per kg excise duty on edible oils, both branded and unbranded, and Rs 1.25 per kg on vanaspati.

Singh had a major package of concessions for the textile sector. Powerlooms whose declared value of stocks do not exceed Rs 10,000 per loom will be exempt from scrutiny for tax purposes. He also assured the House that this would not be levied retrospectively.

He said small powerlooms operating with 8 to 10 looms will be fully exempt from excise duty with the choice of registering or opting out of CENVAT. Excise exemption for unbranded, woven and knitted readymade garments has been given with prescribed ceiling for clearance of Rs 25 lakh and an annual turnover of Rs 30 lakh.

On the direct tax front, Singh announced 100 per cent tax exemption to offshore banking units being set up in Special Economic Zones (SEZs) for three years, besides 50 per cent exemption for the subsequent two years.