In the equity markets, his proposals obviously met with broad investor approval, with the BSE sensex closing144 points up at 6,714 points while the NSE Nifty ended at 2,103 points, up by 42 points. The rupee closed strongly at 43.68 to the dollar.

Indirect tax proposals: Customs
With regard to indirect taxes, Chidambaram stated that he intended to advance the government's declared policy of making the customs duty structure closer to that of India's East Asian neighbours. Accordingly he has reduced the peak duty rate for non-agricultural products from 20 per cent to 15 per cent. In line with the peak duty rates, the customs duty rates on capital goods and raw materials have also been brought down, while inverted duty structures have also been corrected.

By way of promoting investment, the FM has proposed reducing customs duties on selected capital goods to below fifteen per cent - while it would be ten per cent in some cases, it will be at a low of five per cent in some others.

Proposed customs duty rates:

• Textile machinery: Duty reduced from 20 per cent to 10 per cent
  
• Food processing industry: Duty on refrigerated vans reduced from 20 per cent to 10 per cent.
  
• Leather and footwear industry: Customs duties on seven specified machinery reduced from 20 per cent to 5 per cent. Duty on ethyl vinyl acetate (EVA), an input for the footwear industry, also reduced from 20 per cent to 10 per cent.
  
• Pharmaceuticals and biotechnology: Customs duty on nine specified machinery used in these two sectors reduced to 5 per cent.
  
• Customs duties on specified parts of battery-operated road vehicles and for printing presses reduced from 20 per cent to 10 per cent.
  
• Primary and secondary metals: Customs duties reduced from 15 per cent to 10 per cent. Similarly,
  
• Industrial raw materials: Catalysts, refractory raw materials, basic plastic materials, molasses and industrial ethyl alcohol, which are key inputs to manufacture, will now be liable to a reduced customs duty rate of 10 per cent, with lead attracting duty at 5 per cent.
  
• Coking coal with high ash content: Duty brought down to 5 per cent from the current 15 per cent.
  
• Textile sector: Duty rates on polyester and nylon chips, textile fibres, yarns and intermediates, fabrics, and garments to be reduced from 20 per cent to 15 per cent.
  
• Electronics and telecom sectors: On 217 Information Technology Agreement (ITA) bound items, the duty is required to be brought down to nil, accordingly customs duty on specified capital goods and all inputs required for the manufacture of ITA bound items have been removed. However, a countervailing duty (CVD) of 4 per cent on all imports has been imposed to compensate for the State level taxes, in particular the forthcoming State level VAT that is proposed to be imposed on corresponding domestic goods. The levy of a CVD of 4 per cent will be only on the imports of ITA bound items and their inputs that attract nil duty. Credit for the CVD will be available against payment of excise duty. However, IT software will be exempt from the proposed CVD.
  
• Agricultural goods: No changes in the customs duties applicable to this sector except an increase in the duty on cut flowers from 30 per cent to 60 per cent. However the duty rate on cloves has been reduced to 35 per cent.
  
• Atmospheric drinking water generators: In order to encourage the import of technology to produce pure drinking water, import duty on atmospheric drinking water generators reduced from 20 per cent to 5 per cent.
  
• Petroleum products: The customs duty on crude petroleum will be reduced from 10 per cent to 5 per cent. On LPG for domestic consumption and on subsidised kerosene, the customs duty will be nil. Other petroleum products, including motor spirit (MS) and diesel (HSD), will have their customs duty reduced from the current level of 20 or 15 per cent to 10 per cent.

Indirect tax proposals: Excise
With reference to his excise proposals the finance minister stated that the government's intention was to bring as many goods as possible to the CENVAT rate of 16 per cent. While five items currently attract rates of 24 per cent, the FM has picked out three, namely polyester filament yarn, tyres and air conditioners, and reduced the excise duty on these goods to 16 per cent. He said that manufacturers of motor-cars and aerated drinks, the two sectors denied any rebates, would have to wait for some more time.

He also stated that the CENVAT exemption route for natural fibres would remain in force and provided independent texturisers the option to avail of the exemption route or pay 8 per cent excise duty with CENVAT credit.

Proposed excise duty rates:

• Imitation jewellery: Excise duty reduced from 16 per cent to 8 per cent
  
• Branded jewellery: Expensive and premium jewellery will now attract an excise duty of 2 per cent. There will be no levy on unbranded jewellery, including unbranded gold jewellery.
  
• Mosaic tiles: Will attract duty at 8 per cent
  
• Road tractors: For semi-trailers of engine capacity exceeding 1800 cc will attract duty at 16 per cent. Agricultural tractors will continue to remain exempt.
  
• Tea: A surcharge of Re1 per kg on tea, currently in force, has been abolished.
  
• Edible oils and Vanaspati: An excise duty of Re.1 per kg on refined edible oils and Rs.1.25 per kg on vanaspati is currently in force, which has now been abolished.
  
• Matches: The excise duty on mechanized and semi-mechanised sectors have been reduced from 16 per cent to 12 per cent while hand-made matches are now fully exempt.
  
• Small Scale Industries: The ceiling for SSI exemption, based on turnover, has been raised from the level of Rs3 crore per year to Rs4 crore per year. Further, SSI units will now have only two options: either full exemption on the first clearance of Rs.1 crore or normal duty on the first clearance of Rs.1 crore with CENVAT credit.
  
• Iron and Steel: The excise duty rate on iron and steel to be restored to the normal level of 16 per cent.
  
• Molasses: Rates increased from Rs.500 per MT to Rs.1000 per MT
  
• Cement clinkers: Raised from Rs.250 per MT to Rs.350 per MT
  
• Petrol and diesel: The cess on petrol and diesel has been increased by 50 paise per litre. The additional resources will be earmarked exclusively for the national highways, and a suitable amendment is being proposed to the Central Road Fund Act, 2000.
  
• Tobacco: The specific rate on cigarettes to be increased by about 10 per cent with a surcharge of 10 per cent on ad valorem duties on other tobacco products including gutka, chewing tobacco, snuff and pan masala. However, biris will not be subject to this levy. The proceeds will finance the National Rural Health Mission.
  
• Petroleum products: Crude petroleum and LPG for domestic consumption and kerosene will attract nil excise duty. The FM also proposes to fix the excise duties on petrol and diesel as a combination of ad valorem and specific duties. The proposed changes are revenue neutral, and there will be no increase in the retail prices of these products as a result of the changes in the duty structure.
  
• Service tax: The rate of service tax will remain at 10 per cent. service providers whose gross turnover does not exceed Rs.4 lakh per year will be exempt from service tax. Some additional services have been brought into the service tax net, and they include pipeline transport of goods; site formation, demolition and like services; membership fees of clubs and associations; packaging and specialized mailing services; survey and map making services; dredging services in rivers and harbours; cleaning services for commercial buildings and similar premises; and construction of planned residential complexes, with more than 12 dwelling units, developed by builders. The coverage of certain services shall also be expanded.

The FM stated that consequent to changes made in customs and excise duties, the drawback rates for exported goods will be reviewed and modifications, wherever necessary, will be notified by April 30, 2005. The FM also announced the setting up of an advisory committee to advise the government on the extent of abatement for both excise duty and service tax as a trade facilitation measure.