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Reduction in Cenvat, an anti-inflationary measure

Ramnath Subbu

MUMBAI: The highlight of Budget 2008-09 was no doubt the addressing of the long standing issue of farmer indebtedness. But, for Indian industry, the revised tax rates of excise and personal level will reduce prices and put more money in the hands of the consumer. Reactions to the Finance Minister’s announcements have been varied.

A. B. Godrej, Chairman, Godrej Group, felt that overall, the Union Budget was good.

“The proposed expenditure on education, social and rural sectors can do the economy good if there is a match between the outlay and the outcome. The reduction in Cenvat from 16 per cent to 14 per cent is a good anti-inflationary measure.”

Habil Khorakiwala, Chairman, Wockhardt, termed the budget as “India’s first-ever humane budget.” The halving of excise duty on pharmaceuticals to 8 per cent has been a welcome move and according to Mr. Khorakiwala, “with a tax holiday for the next five years for setting up hospitals in Tier-II cities and rural India, the improvement of healthcare services will get a major boost with active participation from the private sector.”

Swati Piramal, Director, Strategy and Communications, Nicholas Piramal India, told The Hindu that “the reduction in excise duty has been a long-standing demand from us as transaction costs in our industry are as high as 60 per cent. The announcement, though welcome, is a bit late in the day because around 70 per cent of manufacturers have moved to excise-free zones and the remaining are in the small scale sector. Also, it was disappointing that the tax exemption for pure R&D, which was withdrawn last year after five years, had not been re-introduced.

The announcement of tax holiday for the hospital sector was welcomed. “One good thing for the hospital sector is the announcement of the 5-year tax holiday for hospitals set up in the Tier-II and Tier-III cities.

This should help many corporate players set up hospitals in smaller towns,” said Pramod Lele, CEO, Hinduja Hospital.

The automobile sector has seen a cut in excise duty for buses and chassis, small cars and two- and three-wheelers from 16 per cent to 12 per cent. Karl Slym, President and Managing Director, General Motors India, felt that the budget did not fully meet expectations.

For the textile industry, the continuation of the TUF package during the 11th plan period and the increase in its allocation by 20 per cent and the approval to 30 integrated textile parks, are positive steps, according to Gautam Hari Singhania, Chairman and Managing Director, Raymond. He however, felt that it fell short on measures with regard to the exports sector.

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