Union Budget 2007-08 is positive for petrochemical and polymer industry

01-Mar-07

The finance minister of India, as expected, announced a relatively stable annual budget not making any major changes in direct and indirect taxes. This will provide stability to the Indian economy for the financial year 2007-08. India is expected to achieve 9.2% growth in GDP during 2006-2007. Inflation over the entire year would average at 5.2-5.4%. The Government has apparently not taken major corrective actions in this budget to control the inflation but seems positive & confident for maintaining at this level in the coming year. The custom duty on polymer as well as polymer additives has been reduced from 12.5% to 7.5% resulting in reduction in cost by about 5%. However, an increase of 1% of education cess from 2 to 3% will reduce the benefit by 1%. Overall there will be a benefit of 4% on imports of polymer and polymer additive. Large pipes used in main line of water distribution and gas conveyance will become cheaper due to abolition of excise. It will benefit both HDPE & PVC pipes beyond 200 mm diameter. The peak custom duty is reduced from 12.5% to 10%. There is no change in the excise duty as well as service tax. Only the education cess has been increased from 2% to 3%. There is a small benefit to an individual in income tax. All income tax assessees will save Rs.1000 because there is an increase of Rs.10000 for all slabs. The minimum taxable income for senior citizen will now be Rs.195,000 and Rs.145000 for women. Basic taxes rates are not changed for individual as well as for corporate companies. Due to an increase in dividend tax from 12.5 % to 15 % the corporate as well as investor will be at loss. Service tax is not increased but is spread wider on many other services. There is a benefit for mall service provider by exempting Rs. 8 lakh earned from services. Minimum alternative tax is also spread. It now includes the IT sector that earns from companies from outside of India. It will hit IT sector. Some other sectors that will benefit from this budget are: " Gems & jewellery " Textile " Packaging Sectors that could be adversely affected are: " Information Technology " Cement Most of the other sectors will find this budget neutral. First impression of the budget seems positive and stable. However, a review of details will give us a more accurate understanding.