In a bid to overcome the impact of the global economic meltdown on its domestic economy, the Indian Government has announced its third stimulus package that entails cutting down excise and service tax rates across-the-board by 2%.
Service tax has been reduced by 2% to 10% from 12% on taxable services. Excise duty has been cut across-the-board to 8% from 10%. However, excise rates on items that attract 8% and 4% duty remain unchanged. Excise duty cuts of 4% announced earlier in the stimulus package in December 2008 would be extended into the new fiscal year. Excise duty on bulk cement has been reduced to 8%. Duty concession on naphtha for production of power sector will continue beyond Mar. 31, 2009. The states have been allowed to borrow an additional 0.5% of the Gross State Domestic Product (GSDP). The exemption will continue in the next fiscal.