PM sets up high-powered economic committee
New Delhi: Prime Minister Manmohan Singh has set up a high-powered committee to take policy decisions on key economic partners and immediate neighbours.

The new Trade and Economic Relations Committee will have permanent members including three cabinet ministers and top policy advisers and will be a major step in evolving a coordinated approach for India's external economic engagements. The Prime Minister will head the committee.

The committee members will include the Finance minster P Chidambaram, External Affairs minister Natwar Singh, Commerce and Industry minister Kamal Nath, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Chairman of Economic Advisory Council to Prime Minister, C Rangarajan.

Increasing globalisation and enhanced economic interaction are the reasons that have prompted the PM to take a coordinated and holistic view of India's economic relations. The body would provide cabinet clearances as and when required.

The new committee will act as strategic think tank and ensure coordinated approaches across ministries, which will help do away with departments working on parallel tracks and sometimes cross purposes.

The committee will also look at free trade agreements, comprehensive economic cooperation agreements and other forms of bilateral, regional and multilateral economic trade ties.
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Savings accounts exempt from cash transaction tax
New Delhi: The Finance Minister, P. Chidambaram, has softened the incidence of the proposed Fringe Benefit Tax (FBT) on companies, while exempting transactions in savings bank accounts from the Banking Cash Transaction Tax (BCTT).

Replying to a debate in the Lok Sabha on the Finance Bill 2005, Chidambaram also introduced amendments to raise the minimum threshold limit for imposition of the 0.1 per cent BCTT for non-savings bank account transactions from the earlier Rs10,000 withdrawal in a single day to Rs25,000 for individuals and Hindu undivided families (HUF), and Rs1 lakh for other accounts, including corporate accounts. The BCTT would come into effect from June 1.

On personal income tax, the Finance Minister announced additional relief to women and senior citizens by raising the exemption limits. While the exemption limit for women has been increased from Rs1,25,000 to R1,35,000, for senior citizen it would be Rs1,85,000 from the earlier Rs1,50,000.

Chidambaram has also clarified that the additional exemption of Rs1,00,000 on investments in specified instruments need not come from the income chargeable to tax. The Finance Bill had earlier proposed investment in the specified savings instrument would be exempt from tax up to the Rs1 lakh limit, provided it was made out of the assessee's "income chargeable to tax."

Justifying the imposition of the BCTT to create a tax-trail for large cash transactions, Chidambaram said that the banking system was increasingly being used for money laundering. "There is a misconception that money put in a bank is white money and is not tainted money. The banking system is, in fact, a well-known instrument of laundering money. I have massive evidence of the banking system used for laundering," he said.

Chidambaram said that while the tax trail would be created, the tax authorities would intervene only when the withdrawals amounts are really large and recurrent.

On FBT, he said that in all but four categories he had decreased the tax incidence from the proposed 50 per cent to 20 per cent. "If every company gives every benefit to every employee the effective tax rate would go up by 1-1.5 per cent," he said. The effective corporate tax rate now works to around 20 per cent on the tax rate of 33 per cent, he pointed out.

The Finance Bill 2005 was passed by the Lok Sabha through a voice vote.
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Chidambaram: Settlement with ITC in best interests of revenue
New Delhi: The Finance Minster, P. Chidambaram, has defended the Government's decision to go for a compromise settlement with ITC Ltd in the 1987 excise evasion case.

"What we have done is in the best interest of revenue in a matter that was pending for years," Chidambaram said, replying to the debate on the Finance Bill on Monday.

The Finance Minister was responding to the Opposition's criticism on the Government's decision to enter into a compromise after promulgating an Ordinance for the collection of about Rs800 crore.

Under the settlement, ITC agreed to forego its claim on the Rs350 crore that it had earlier deposited with the Government, while the Centre agreed not to proceed with its demand for the remaining amount.

Chidambaram said the decision was taken after great deliberation.
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Central PSEs record 64 per cent jump in net profit in 2003-04
New Delhi: Despite budgetary support coming down by six per cent the Central Public Sector Enterprises (CPSE) have shown a 64 per cent increase in cumulative net profit at Rs53,169 crore in 2003-04. The turnover of these firms has risen about 10 per cent to Rs5,86,140 crore against the previous year, according to the Public Enterprises Survey 2003-04.

The CPSE's reliance on extra budgetary resources went up by 27 per cent in 2003-04, which, along with internal resources, formed the major portion of their resource mobilisation effort during the year.

The financial year witnessed a significant number of enterprises moving out of the red. Of 242 enterprises included in the survey, a total of 140 firms made profits in 2003-04, as against 120 in the previous fiscal. The number of loss-making enterprises was down to 88 in 2003-04, from 105 in 2002-03.

According to the data, the enterprises reported a 19 per cent increase in net worth at Rs2,50,822 crore during the year. Foreign exchange earnings of the enterprises through the export of goods and services increased to Rs34,893 crore in 2003-04, from Rs26,296 crore during the previous year. The better performance by the firms translated into a nearly nine per cent higher contribution to the Central Exchequer at Rs89,025 crore in 2003-04, through excise and customs duty, corporate tax, interest on loans, dividend and other duties.
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Duty drawback rates revised upwards
New Delhi: Releasing the All Industry Rates of Duty Drawback, 2005-06, the Government has announced an upward revision in drawback rates for most products. The new rates will come into effect from May 5.

Barring a few exceptions, the rates on all export products have been expressed in ad-valorem terms in lieu of earlier specific rates. "Though the weight-based drawback is reported to be less vulnerable to abuse, the ad-valorem rates have the dual virtue of first being fair to the exporters, and secondly, serve the policy objective of encouraging the export of value added items," said a press statement.

The drawback rates have been determined on the basis of certain broad parameters, including the prevailing prices of inputs, standard input/output norms, share of imports in the total consumption of inputs and the applied rates of duty. The element of education cess and incidence of duty on High Speed Diesel has been factored in the drawback rates.

The new drawback schedule now covers about 2,620 entries. "The new schedule has much wider scope in comparison with the existing schedule which covers about 1,050 entries only. In view of switchover to HS Nomenclature, the Schedule now covers several new products in chemicals, plastics, textiles, steel and machinery sectors. The advantages of adopting HS classification are many. Apart from transparency and completeness of coverage, it would now be easier to compile revenue foregone figures tariff line-wise. Communication with various agencies dealing with international trade will, henceforth, be smooth," said the statement.
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