[sustran] Finance Ministry considers lowering duty on buses

[Vinay Baindur]

http://www.business-standard.com/india/news/finance-ministry-considers-lowering-dutybuses/383788/

Finance Ministry considers lowering duty on busesJyoti Mukul & Vrishti
Beniwal / New Delhi January 27, 2010, 0:08 IST

Even as the finance ministry is looking at exiting stimulus measures, it is
considering a proposal for lowering the excise duty on buses from the
present level of 8 per cent.

The Ministry of Urban Development has asked the finance ministry to ower the
duty in order to promote the public transportation system in the country.

A senior official told Business Standard that the proposal has been made to
strengthen city transportation and promote a more environment-friendly way
of commuting.

“Though the duty on bus is at 8 per cent, we want that the Ministry of
Finance should further bring it down,” said the official.

The urban development ministry had last year too proposed that buses meant
for urban transport with a minimum seating capacity of 20 be exempted from
value added tax and central excise duty to help restore economic growth.

The demand had not found any takers in the finance ministry at that time
because the government had provided stimulus to the industry earlier in the
year, by sanctioning 15,000 buses for urban transport in 61 cities.

Besides, it had reduced excise duty on buses from 16 per cent to 12 per cent
and further to 8 per cent as part of the stimulus measures to boost the
economy.

This time also, it would be difficult for the government given the condition
of its finances. The stimulus packages are projected to widen the fiscal
deficit to 6.8 of the gross domestic product this financial year.

“Any further duty cut will lead to loss of revenue to the government. Though
the revenue loss will not be substantial, if we give relief to one section,
others will also ask for it. It will be better to enhance the allocation for
the segment rather than reducing the duty further. Moreover, the auto
industry is recovering now and it does not need further stimulus,” said a
finance ministry official.

The urban development ministry has also proposed more than three-fold
increase in Gross Budgetary Support (GBS) for its plan outlay for 2010-11.
In its proposal to the Planning Commission, it has sought Rs 10,858 crore as
against Rs 3,060 crore allotted to it under the Budget 2009-10. The demand
is more than the Rs 10,610 crore it had been given in the first three years
of the Eleventh Five-Year Plan period (2007-12). The residual GBS available
for the remaining two years (2010-12) is Rs 1,833 crore.

“The increase in GBS demand is mainly on account of greater spending
expected primarily on account of the Jawaharlal Nehru National Urban Renewal
Mission,” said an urban development ministry official.