New Delhi: The engineering industry too has welcomed the Union Budget but with certain reservations.

Although finance minister P Chidambaram declared that VAT will be introduced from April next year, experts feel that a hike in service tax from 8-10 per cent could negatively affect the industry.

"De-reservation of the 85 items from the small scale list is disappointing and there has been a hike in the service tax from 8 per cent to 10 per cent," said Rajendran, President, South India Engineering Manufacturing Association.

However, the reduction of central excise duty for non-alloy steel from 15 per cent to 10 per cent has found favour with the engineering association.