Highlights of Pre-Budget Economic Survey

Exchange Rate for imported goods is Rs 74.03 Per Pound Sterling and Rs 51.22 Per Yen-Exchange Rate for export is Rs 72.45 Per Pound Sterling and Rs 49.94 Per Yen-Customs Non-Tariff Notification No.128 Sensex slips further and closes at 8773 100 per cent EOUs allowed to export non-basmati rice-DGFT Notification No.59 Customs duty of 5 per cent imposed on import of Pig Iron, spiegeleisen, semi-finished products, flat products & long products Import of Crude Soyabean Oil subjected to 20 per cent customs duty- no change in import duty on refined soyabean oil-Customs Tariff Notification No.122 Time-limit for filing refund of service tax extended to 6 months-Service Tax Notification No.32 Rahul Bajaj asks Industry to prepare for the worst Tariff Value for import of Brass Scrap is 3525 and for poppy seeds 5206-Customs Non-Tariff Notification No. 127 CBEC clarifies the entire amount of duty paid by the manufacturer, as shown in the invoice would be available as credit irrespective of the fact that subsequent to clearance of the goods, the price is reduced by way of discount or otherwise-Central Excise Circular No.877 Mandavariya (Kishangarh), District Ajmer notified for Unloading of imported goods and loading of export goods-Customs Non-Tariff Notification No.117 SC Ruling-the entitlement of benefit in terms of Section 32AB, Section 80HH and Section 80I of the Income Tax Act- conversion of Jumbo rolls of photographic films into small flats and rolls in the desired sizes amounted to manufacture/production-AIT-2008-413-SC SC Ruling-Whether any "gift" arose in terms of Section 2(xii) of the Gift-tax Act, 1958 on the allotment of rights issue by the appellant company to its shareholders vide Board's Resolution- Whether there was any element of "gift" as defined under Section 2(xii) in the appellant issuing Bonus shares in the ratio of 1:23-AIT-2008-412-SC DEPB benefit allowed on export of cement and steel-DGFT PN 108 exports of cement in all types and forms and primary steel products eligible for export incentives under Focus Market Scheme-DGFT Notification No.58 Import of Marble Tiles-DGFT Notification No.57 Clarification on setting up Duty Free Shops approved by FIPB-Customs Circular No.19 HC Ruling-Income Tax-"reserves" arising out of the acquisition of the business of Tata Cellular Limited could never have the character of "income" in the hands of the petitioners-pre-requisite condition contained in proviso to section 147 to enable the re-assessment to be opened after period of 4 years have elapsed have not been met-AIT-2008-410-HC HC Ruling-Central Excise- valuation of the goods for the purpose of excise duty and whether excise duty was chargeable under Section 4 or Section 4A of the Central Excise Act 1944-while construing rule 3, who are excluded are only the institutional or industrial consumers as explained in Rule 2A and the industrial or institutional consumers in terms of the proviso to rule 2(p) for the purpose of chapter-II are the same-If the person who purchase the prepacked commodity not directly from the manufacturer or packers, they are consumers and the declaration will be of no effect-AIT-2008-408-HC Government considering imposition of import duty on steel Bad News for Consulting Engineers- whether turnkey contract can be vivisected?- The conclusion in Daelim case on the point, prima facie, being not in accordance with law, matter goes to Larger Bench-AIT-2008-405-CESTAT Larger Bench of CESTAT rules Credit is admissible on an input service relating to the business-AIT-2008-407-CESTAT credit of the service tax paid on the outdoor catering (canteen) service is admissible as input service under Rule 2(l) of the Cenvat Credit Rules, 2004-AIT-2008-406-CESTAT The payment for use of "services for MTNL/other companies via the interconnect/port/access/toll by the assessee would not fall within the purview of payments as provided for under section 194J of the Act, so as to be eligible for tax deduction at source-The interconnect charges/port access charges cannot be regarded as fees for technical services-AIT-2008-404-HC Computation of Value under Section 14 for Levy of Export Duty - Customs Circular No. 18 Advance Ruling- Whether the service fee paid by the applicant to Intertek Testing Management Limited UK under Global Management Service Agreement is taxable as "Royalties & Fee for Technical Services" as per the provisions of Article 13 of DTAA between India & UK? Whether the applicant is required to deduct tax at source on the service fee paid to Intertek Testing Management Limited, UK, at the rate of 10% plus applicable surcharge and cess as per the provisions of section 115A(1)(b)(BB) of the Income-tax Act-AIT-2008-401-AAR Larger Bench of SC Ruling-whether the revenue can be precluded from filing an appeal even though in respect of some other years involving identical dispute no appeal is filed -AIT-2008-403-SC SC Ruling-whether transfer of Banking Undertaking gave rise to taxable capital gains under Section 45 of the 1961 Act-it was not possible to compute capital gains and, therefore, the said amount of Rs. 10.20 cr. was not taxable under Section 45 of Income Tax Act-AIT-2008-400-SC Export duty of 8 per cent notified in place of earlier rate of Rs. 200 per tonne on export of iron ore fines-Customs Tariff Notification No.121 Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Second Amendment Rules, 2008-Central Excise Non-Tariff Notification No.45 SC rules Ethylene and propylene manufactured by the assessee and used in its factory in the further manufacture of the same goods would be entitled to the benefit of exemption contained in notification no.217/86-AIT-2008-398-SC New DEPB Rates on export of all products notified–DGFT PN 102 service tax paid under Section 66A is available as 'input credit' under Cenvat Credit Rules, 2004 provided the said services are used as input services by the manufacturer or producer of final products or a provider of output taxable service-Service Tax Trade Notice No.43/2008 Anti-dumping duty imposed on import of cable ties from China & Taiwan-Customs Tariff Notification No.118 Definitive Anti-dumping duty imposed on import of Phenol from Singapore, South Africa & European Union-Customs Tariff Notification No.114 High-tech products entitled to benefits under High-Tech Products Export Promotion Scheme –DGFT PN 101

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Highlights of Pre-Budget Economic Survey

· Economy moves decisively to higher growth phase

· Economic growth in 2007-08 projected at 8.7 %

· Overall inflation projected to decline from 5.6 per cent in 2006-07 to 4.1 per cent in 2007-08

· Acceleration in domestic investment and savings rates.

· Buoyant growth in Government Revenues

· Investment climate full of optimism

· Concern over slowdown in consumer goods segment of industry and infrastructure constraints

· Indian economy at market exchange rate to cross 1 trillion dollars in current fiscal

· Growth in service sector continues to be broadbased with 'transport and communication' being the fastest during the Xth Five Year Plan

· 13.9 per cent growth in financial services in 2006-07

· Annual average growth of money on an accelerating trend since 2003-04 reaching 19.5 per cent in 2006-07

· Considerable uncertainty in quantifying the downside risk arising from the housing market and sub-prime mortgage market crisis in US

· 150 per cent increase in net foreign direct investment inflows in 2006-07 to US $ 23 billion. Trend continues in the current financial year with gross FDI inflows reaching US $ 11.2 billion in first six months

· Trade to GDP ratio increases from 22.5 per cent of GDP in 2000-01 to 34.8 per cent of GDP in 2006-07

· Heightened urgency to augment and upgrade infrastructure both physical as well as social and in particular power, roads and ports

· Persistent institutional weaknesses and implementation constrains at different levels of government need to be addressed

· Private sector requires policy and regulations that are comprehensive but simple and clear and credible

· Share of Central Government expenditure on social services, including rural development, in total expenditure (Plan & Non-Plan) increased from 10.97 per cent in 2001-02 to 16.42 per cent in 2007-08

· Agricultural growth, dependent as it is on monsoon, continues to fluctuate. Overall foodgrains production in 2007-08 expected to fall short of the target by 2.2 million tonnes. Need for second green revolution particularly in rainfed areas emphasized.

Text of the statement of Finance Minister P. Chidambaram after placing Economic Survey in the Parliament:

"The economy has decisively moved to a higher growth trajectory during the five years to 2007-08. In terms of GDP, the growth rate has averaged 8.7 per cent per annum during these five years. This indicates stability and sustainability. The growth is reflected in a near doubling of the pace at which the average income of our people is growing. If the rate of growth of per capita GDP continues at the five year average of 7.2 per cent per year, average income would now double in a decade instead of a generation or more, earlier. The acceleration in improvement of the condition of the common man is also reflected in a near doubling of the rate of growth of per capita private consumption to 5.1 per cent per annum (from 2.6 per cent in the previous 11 years). With better targeting of government services and an increase in their quality we can ensure that the overall welfare of the common man in terms of both private consumption and supply of public goods continues to increase rapidly.

The higher economic growth trajectory and the projected growth of 8.7 per cent in 2007-08 is based on a quantum jump in savings and investment rates. The rate of investment (GCF) was 35.9 per cent of GDP in 2006-07 and is projected to increase in 2007-08. This is an unprecedented level of investment and shows the firm foundations on which the growth acceleration has been built. The saving rate has similarly scaled new highs reaching 34.8 per cent of GDP in 2006-07.

Given this solid foundation of domestic investment and saving, we are confident of meeting the Eleventh Plan (2007-08 to 2011-12) target of 9 per cent average growth. We will be able to mobilise the resources for meeting the growth target of 9 per cent, as set for the Eleventh Five Year Plan. Macro-economic fundamentals continue to inspire confidence and the investment climate is full of optimism. This is reflected, for instance, in the significant surge in capital inflows into the economy in the recent period, even when the global economy is showing distinct signs of slowing down. Buoyant growth of Government revenues has made it possible to maintain fiscal consolidation as mandated under the FRBMA. At the same time, we have the means to bridge and address the chronic gaps and weaknesses in our physical and social infrastructure.

Inflation, which had risen during the second half of 2006-07, has been brought under control. The year on year rate of inflation declined to less than 4% in August 2007 and had remained below 4 per cent for 23 consecutive weeks since then. The price inflation in primary articles has similarly been brought down to 3.8 per cent in January 2008. Given the high level of food, oil and other commodity prices in international markets, the risks to inflation remain. Thus keeping inflation under control in an uncertain global environment will be one of the major challenges in 2008-09. There are, also downside risks to growth arising from the slowdown and possible recession in the global economy.

There are several challenges to inclusive growth, namely agriculture, infrastructure, education and skill development. The last few years have seen a resurgence of the manufacturing sector and a continued broad based growth of the services sector. The agriculture sector/ dependent as it is on the monsoon, continued to fluctuate, though the five year period ending 2007-08 had the second lowest year to year variation since the five years ending 1956-57. We need to accelerate the pace of growth in agriculture on a sustained basis.

Despite efforts to accelerate the pace of Infrastructure development, the demand for infrastructure services has grown even faster than the supply. It is imperative to augment and upgrade infrastructure both physical and social. This requires mobilisation of unprecedented amount of capital with macroeconomic stability, which can only happen if both the public and private sectors have the incentive and motivation to perform at their best. We have to harness our demographic potential and promote inclusive growth by providing the basic education and skills needed in the job market.

I am optimistic about growth and containment of inflation in the coming year. It will be my priority to continue to provide a conducive investment climate and manage the macro economy to facilitate non-inflationary growth. We have to ensure that the benefits of this growth percolate to the most marginal and vulnerable segments of the society.

If you wish me to sum up in one phrase the outlook for 2008-09, I would say "optimism, but with caution as the watchword." There are a number of things going in favour of India. We need to capitalize on these opportunities while at the same time responding to the evolving situation in the global economy in a manner that our growth story is not affected.”