TRADE NOTICE No.: 31/2001 Dt. : 14.05.2001

Sub.: CE – Finance Bill, 2001 – Changes in the Customs and Excise duties

announced in the Lok Sabha on 25^th April, 2001.

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The copy of Ministry’s letter F.No. B-9/4/2001-tru dt. 25^th April, 2001 and Appendix is forwarded herewith for information and necessary action.

The contents of this Trade Notice may please be brought to the notice of all constituent members of your association in general and manufacturers in particular.

(Issued in file C.No. IV/16/9/2001 – Tech)

(G.V. KRISHNA RAO)

ADDITIONAL COMMISSIONER (TECH.)

As per mailing list

(Both trade and department)

F.No. B-9/4/2001 – TRU

Ministry of Finance

Department of Revenue

New Delhi, the 25^th April, 2001

All Chief Commissioners of Customs & Central Excise

All Commissioners of Customs & Central Excise

Sir/Madam,

Sub. : Finance Bill, 2001 – Changes in the Customs and Excise duties

announced in the Lok Sabha on 25^th April, 2001.

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I am directed to say that the Hon’ble Finance Minister has announced certain changes while moving the Finance Bill, 2001 for consideration in the Lok Sabha on the 25^th April, 2001. Extracts of the Finance Minister’s speech are appended for your information.

2. Notification No. 18/2001 – Central Excise dated 26.04.2001 and No. 44/2001 – Customs dated 26^th April, 2001 have been issued today to give effect to the changes announced, except in respect of the excise duty on readymade garments, excise duty on independent textile processors and the excise duty on ball and roller bearings. The changes brought about by the above notifications are effective from 26^th April, 2001.

3. Notifications relating to changes in the excise duty on readymade garments, excise duty on textile processors and excise duty on ball and roller bearings would be sent separately. These changes would be effective from 1^st May, 2001.

4. The changes brought about by the notifications No. 18/2001 – Central Excise and No. 44/2001 – Customs are self explanatory. Special mention may, however, be made in respect of the customs duty for motor cars and two wheelers. It would be noticed that Completely Built Units (CBUs) of all types of motor cars and other motor vehicles mentioned against Sr.No.314 of amending notification No. 44/2001 – Customs shall now be subjected to basic customs duty rate of 60%. Motor cars and other vehicles imported in other forms like in CKD condition or SKD condition would bear basic customs duty of 35%. Similar kind of provision has been made of for two-wheelers imported as Completely Built Up Units and otherwise.

5. Ships falling under heading No. 89.01 have been exempted from duty. However, ships imported for breaking up will continue to attract duty.

6. It may also be noticed that some of the changes made by notification No. 44/2001 – Customs provide for exemption on end-use basis.

7. Notification No. 18/2001- Central Excise dated 26.04.2001 provides for exemption to footwear of retail price not exceeding Rs. 125 per pair. However, the exemption applies only to footwear made of plastic materials only.

8. Any doubt or difficulty with regard to these notifications may kindly be brought to the Ministry’s notice at the earliest.

Yours faithfully,

S/d

(T.R. Rustagi)

Joint Secretary to the Government of India

APPENDIX

Extracts of the speech of Shri. Yashwant Sinha, Finance Minister, while moving the Finance Bill, 2001, for consideration in the Lok Sabha on the 25^th April, 2001.

Mr. Speaker, Sir, in my budget proposals I had announced several major changes in the taxation structure and procedures. On the excise side, I had introduced a single rate of CENVAT that applies to most of the commodities. I rationalised the regime of special excise duties. On direct taxes, I have maintained the stability of rates. These proposals have been widely acclaimed by the trade and industry. I have, however, also received representations and suggestions from different quarters with regard to a few aspects of changes that I introduced in the excise and customs duty structure. Many Hon’ble Members have also written to me. I express my gratitude for their suggestions and advice.

2. Sir, on careful consideration of all aspects, I propose to announce a few modifications in my budget proposals.

3. I had proposed to impose 16% excise duty on branded readymade garments and accessories. It has been argued that restriction of the levy to branded garments and accessories alone would cause distortions and manipulations. Taking these arguments into account, I propose that all garments, branded or unbranded, would be subjected to excise duty at 16%. However, clothing accessories, raincoats and undergarments will be exempt from the new levy. The small scale excise duty exemption scheme would be applicable to garments also. The modified scheme will be effective from 1^st May, 2001.

4. The House will recall that I had proposed an ad-valorem structure of excise duty for independent textile processors. While some have welcomed the abolition of chamber based duty, some others have pleaded for its restoration. I am convinced that an ad-valorem duty regime is to be preferred to compounded levy system. However, I have received strong representations that the smaller processing houses are yet to prepare themselves fully to meet the threat of competition and to absorb new technology. I am not inclined to restore the chamber-based duty for all independent textile processors. However, processors whose investment on plant and machinery does not exceed Rs. 3 crore would be allowed the option to pay duty on chamber basis. The rate of monthly payment for those who exercise this option would be increased by Rs. 50, 000 in each of the two pre-budget slabs. No abatement for closure of a stenter or removal of a chamber would be allowed. This change will be effective from 01.05.2001.

5. I also propose to exempt footwear made exclusively of plastic materials and of retail sale price upto Rs. 125 per pair from the nominal excise levy of 4% ad-valorem that I had proposed in the budget.

6. In my budget proposals, I had announced that the ball and roller bearings shall not be eligible to the scheme of SSI exemption. As a special dispensation I propose to exempt units producing ball and roller bearings upto Rs. 25 lakhs per annum from excise duty. This will help tiny units. This new scheme will be operational from 01.05.2001.

7. To encourage indigenous shipping companies to acquire new ships, it is proposed to abolish the 5% customs duty on ships that was introduced in this budget.

8. The customs duty on metcoke is proposed to be reduced to 5% on actual user basis to steel plants to help improve their viability.

9. The concessional rate of duty of 55% for the import of crude palm oil by sick vanaspati units was proposed in the budget. It is proposed to abolish the concessional rate of duty with a view to avoid discrimination.

10. The CVD of 16% on 12 critical items of textile machinery including shuttleless looms is proposed to be abolished in order to promote capital investments and modernisation of textile mills.

11. The House may recall that in my budget proposals I had proposed to increase the basic customs duty on second hand cars and two-wheelers to 105%. My colleague, the Minister of Commerce & Industry, has suggested that in a similar manner the apprehensions of imports of CBUs of cars and two-wheelers need to be addressed. Taking this into account, I propose to increase the basic customs duty on CBUs of cars and two-wheelers from 35% to 60%.

12. In my budget proposals I had proposed to reduce the customs duty on telecom equipment from 25% to 15%. However, the duty on parts and components was retained at 15%. I am informed that equalising the duty rates would effect the domestic telecom equipment to their substantial disadvantage. In order to prevent the loss of production of this segment, I propose to reduce the customs duty on specified parts of telecom equipment other than Populated Printed Circuit Boards to 5%.

13. As a fillip to the IT industry, I propose to add 32 specified items in the list of machines and equipment that are allowed to be imported at a low rate of 5% basic customs duty. Changes in excise and customs duties mentioned above, except a few that are effective from 01.05.2001, will come into fore from tomorrow.