India's Interim Budget To Contain Tax Cuts

by Mary Swire, Tax-News.com, Hong Kong

12 February 2009

India’s forthcoming interim budget, to be announced on February 16, is to contain tax cuts to stimulate the economy it has emerged this week.

According to reports in early February, both Home Minister, Palaniappan Chidambaram, and Commerce and Industry Minister, Kamal Nath hinted that more economy-boosting tax changes were not off the cards, but declined to prematurely expand on the proposals.

The local press has this week reported that the proposals will include an amendment to tax law to redefine the term ‘mineral oil’ in order to expand the seven year tax holiday which currently applies to crude oil producers, to also cover those who harvest natural gas, allowing the likes of Reliance Industries, ONGC, GSPC, Ril and British Gas to also benefit. Reportedly, the Finance Ministry is also considering retracting its tax cut on diesel and petroleum products, and reinstating the 7.5% rate. By boosting oil and gas companies’ output and reinstating the duty it is hoped that both output and government revenues will be optimized, although the restoration of the 7.5% rate is only likely to occur after the forthcoming parliamentary elections.

Other measures anticipated in the February 16 announcement include changes to boost the Indian housing market and extended tax concessions for technology parks.

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