Tax exemption recommendation is balanced: Finmin

A day after releasing a revised draft of the Direct Taxes Code (DTC), the finance ministry today said its recommendations on exempting retirement savings are balanced and would not entail loss of revenue, reports PTI.

"EEE (exempt-exempt-exempt) is only for limited number of saving instruments. It (recommendation) is balanced," revenue secretary Sunil Mitra told PTI when asked about the rationale of watering down the original proposals.

Under EEE mode, contributions in certain savings schemes become tax-exempt as it is deductible from income, the accumulations are also exempt from tax till it remain invested and withdrawals are also not taxed. However, in EET, the first two steps remain tax-exempt, but withdrawals are taxed.

On the impact of the recommendations on revenue, he said, "Tax collection will increase or not it will all depends on rates. The rates we have not put just now. That will go in the legislation."

In the revised DTC, which will replace the 50-year-old Income Tax Act, the finance ministry decided to drop its earlier proposal to tax the Government Provident Fund or the Public Provident Fund withdrawals.

The first DTC draft had proposed to tax all savings schemes, including provident funds, at the time of withdrawal bringing them under the EET (Exempt-Exempt-Tax) mode.

The revised draft also puts pensions administered by the interim regulator Pension Fund Regulatory and Development Authority (PFRDA), including pension of government employees who were recruited since January 2004, under EEE treatment.

The government plans to introduce a draft legislation on the DTC in Parliament in the forthcoming monsoon session.

"If Parliament procedure is complete and it becomes a law, it will be implemented from 1 April 2011," Mr Mitra said yesterday.


Tata Nano available off the shelf now

While the company had recently stated that open market sales of Nano are likely to begin by August with its Sanand plant going into production mode, dealers said the base model can now be purchased within just two days

Customers will no longer have to wait for long periods to own the Tata Nano as dealers are now offering almost immediate delivery of the world's cheapest car, reports PTI.

However, the company is yet to clear a backlog of orders placed by customers.

Due to production constraints, Tata Motors had decided to make bookings through a lottery system and deliver the first one lakh units of the Nano by the end of this year.

While the company had recently stated that open market sales of Nano are likely to begin by August with its Sanand plant going into production mode, dealers said the base model can now be purchased within a period of just two days.

"The base model is almost readily available. You can book today and take the delivery tomorrow," a staffer at a New Delhi showroom said.

Another dealer said that medium and top-end versions of the car would take longer to deliver.

"If booked today, the top-end model can be delivered in 15-20 days," he added.

When asked how they could entertain new bookings when the first one lakh cars were yet to be delivered by the company, the dealer said that it was being done through "management quota".

"You have to write an application to Tata Motors and it will be registered for booking... The car will be delivered under management quota," one dealer official said.

When contacted, a company spokesperson said: "Tata Motors is now engaged in delivering Nanos to those who have already booked, as per schedule, and at the same price as was committed during the booking."

Earlier this month, the company had inaugurated the mother plant for Nano at Sanand in Gujarat. The plant has a capacity of 2.5 lakh units per annum.

After being forced to pull out of West Bengal's Singur district, its first choice, Tata Motors had been producing the car in limited numbers at its Pantnagar facility in Uttarakhand.

The Nano was launched on 23rd March last year. Bookings for the car opened in April 2009 and deliveries began in July that year. It has delivered over 35,000 units so far.

The company had selected 1.55 lakh customers through a draw, and only the first one lakh customers were declared price protected. Nano, touted as the world's cheapest car, is available at Rs1.23 lakh-Rs1.72 lakh (ex-showroom price, New Delhi).


EGoM on fuel prices likely to meet next week

The EGoM may consider freeing petrol price from government control and possibly giving limited autonomy to state oil firms to price diesel closer to market rates

An Empowered Group of Ministers (EGoM) may meet next week to consider raising petrol and diesel prices by Rs2-Rs4 per litre and domestic liquefied petroleum gas (LPG) rates by up to Rs25 per cylinder, reports PTI.

"I was trying for the EGoM meeting on Thursday (17th June) after the usual meeting of the Cabinet. But the meeting could not be fixed for tomorrow because of prior commitments (on part of certain ministers in the group)," petroleum minister Murli Deora said today.

The ministerial panel is now likely to meet next week, possibility on 24th or 25th June.

"We are trying for a meeting next week," he said refusing to discuss possible outcome or agenda before the EGoM.

Sources said the EGoM may consider freeing petrol price from government control and possibly giving limited autonomy to state oil firms to price diesel closer to market rates.

Petrol price will go up Rs3.73 a litre on aligning the domestic prices with international rates. In case of diesel, the proposal is to give oil firms freedom to price the auto fuel only till such time that international crude oil rates stay below $90 per barrel.

If accepted, diesel rates will rise by Rs3.80 per litre immediately.

Sources said domestic retail prices are benchmarked at close to $60 per barrel crude oil price while the global rates currently are over $74 a barrel.

If the crude climbs to $90 per barrel, diesel price in Delhi would have risen by over Rs7 per litre over the current selling price of Rs38.10 a litre.

The government would step in if crude oil crosses $90 and diesel prices would be moderated either through cut in excise and customs duty or through subsidy from exchequer.

Petrol in Delhi currently costs Rs47.93 per litre.

There may not be any problem in freeing pricing of petrol, which is considered a fuel used by the well-off, there were doubts on diesel which is used in transport sector and thus has inflationary impact.

In May, wholesale price index (WPI) based inflation was 10.16%.

If consensus at the EGoM is against even giving limited freedom to oil companies, then the government may settle for a Rs2 per litre hike and try to build consensus for freeing the fuel around budget time in 2011, they said.

Also on the cards is a Rs25 per cylinder hike in domestic cooking gas (LPG) rates in an effort to align retail prices closer to their cost.

The EGoM headed by finance minister Pranab Mukherjee could not reach a decision at its first meeting on 7th June as key members like railway minister Mamata Banerjee and agriculture minister Sharad Pawar were absent.

The EGoM, at the first meeting, had gone into the report of the expert group headed by Kirit Parikh that called for freeing petrol and diesel prices and a steep Rs100 per cylinder hike in LPG rates and a Rs6 per litre increase in kerosene prices.

The oil ministry made a presentation on the impact of the Parikh committee's recommendation, projecting a revenue loss of Rs74,300 crore to state oil firms if petrol, diesel, domestic LPG and kerosene continue to be sold at rates below the imported cost.

The EGoM also discussed the impact of implementing the committee's report on inflation, sources said, adding that freeing auto fuel prices would lead to a 1.4% rise in the WPI.

State-owned Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum currently lose about Rs215 crore per day on selling fuel below imported cost. They currently sell petrol at a loss of Rs3.73 a litre, while the under-recovery is Rs3.80 per litre of diesel, Rs18.82 per litre of public distribution scheme (PDS) kerosene and Rs261.90 on every 14.2-kg LPG cylinder.


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