TIOL-DDT 142 · the untouched capture
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<html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b><font color="#663399" size="3">TIOL-DDT 142</font><br> 23 06 2005<br> Thursday</b></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>De-oiled Rice Bran- freely exportable</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> ITC(HS) Classifications of Export and Import Items 2004-2009 is amended to delete the HS code 2302 20 10 from the schedule 2 make “De-oiled Rice Bran” freely exportable<br> <br> DGFT NOTIFICATION NO. 9 (RE-2005)/2004-2009, Dated: June 21, 2005<br> <br> <font color="#006633"><b>Job work done in relation to Gem and Jewellery- Whether manufacturing activity or provision of service?</b></font><br> <br> This doubt arises if the Board’s F.No. 341/13/2005-TRU dt, 12/05/2005 and the Exemption Notification No. 21/2005 dt. 7/06/2005 are read together.<br> <br> This Board’s letter obviously was given to clarify to field formations, which have interpreted that certain processing activities undertaken by job-workers in relation to manufacture of Gem and Jewellery sector for or on behalf of the client as falling under Business Auxiliary Service.<br> <br> Para (4) of the Board’s letter reads as follows:<br> <br> <b>Process outsourced in gem and jewellery sector which amount to “manufacture” within the scope of section 2(f) of the Central Excise Act, 1944 would not be liable to service tax. Production of goods on behalf of the client is leviable to service tax under ‘business auxiliary service’ only if such production activity does not amount to manufacture.</b><br> <br> So the process undertaken in relation to gem and jewellery sector amounts to manufacture and hence is out of service tax purview.<br> <br> But then look at Notification No. 21/2005 dt.7/06/2005 for similar services (or manufacturing process) provided in relation to gem and jewellery under Finance Act,1994. The operative portion of the notification reads as follows:<br> <br> <b>“the Central Government , on being satisfied that it is necessary in the public interest so to do , hereby exempts the taxable service of production or processing of goods for , or on behalf of , the client , referred in clause ( v ) of clause (19) of Section 65 of the said Finance Act , provided by a commercial concern, in the course of manufacture of ,-<br> <br> (a) cut and polished diamonds and gem stones; or<br> <br> (b) plain and studded jewellery of gold and other precious metals,<br> <br> falling under Chapter 71 of the Central Excise Tariff Act, 1985 ( 5 of 1986 ) from the whole of service tax leviable thereon under section 66 of the said Finance Act.<br> </b><br> This notification means that process undertaken in the course of manufacture of gem and jewellery industry fall under Service Tax purview.<br> <br> <font color="#006633"><b>Subsidies – Govt. invites comments</b></font><br> <br> Ministry of Finance invites suggestions/comments from public on operationalising the National Common Minimum Programme objective of targeting all subsidies sharply at the poor and truly needy like small and marginal farmers, farm labour and urban poor. In this connection, the report <b>“CENTRAL GOVERNMENT SUBSIDIES IN INDIA</b>, December 2004”, and the agenda papers and minutes of the meeting of stakeholders may be referred to.<br> <br> Comments/suggestions may be sent by e-mail to <b>subsidycomments@nic.in</b> before 28th June 2005.<br> <br> The Finance minister had a meeting with stake holders last month and some of the observations in the meeting were:- <br> <br> <b>PDS, Determination of BPL and Issue of Food Coupons</b><br> <br> • The different weaknesses in the targeted public distribution system (TPDS) include ration cards being mortgaged to ration shop owners, large errors of exclusion of BPL families and inclusion of above poverty line (APL) families, prevalence of ghost BPL cards with weaknesses in the delivery mechanism leading to large scale leakages and diversion of subsidised grains to unintended beneficiaries, section of the APL households holding BPL cards actually not lifting their ration quota and thus a part of the entitlement of these households leaking out of the PDS supply chain. <br> <br> Some suggestions in this regard were<br> <br> ++ While some favoured introduction of food stamps/coupons, initially on a selective basis with necessary safeguards, others were not in favour of it as it would be difficult for coupon holders to purchase the rations from private shops. The possibility of private shop owners denying rations to coupon holders and facing reimbursement difficulties due to bureaucratic hassles were also emphasised. <br> <br> ++ It was pointed out that to rectify the errors of inclusion and exclusion, the Government of Andhra Pradesh has come out with specific criteria for selection of beneficiaries under BPL category in rural and urban areas. <br> <br> ++ Elimination of bogus/ghost cards by computerised cards adopting the Iris technology/biometric system proposed to be implemented by Andhra Pradesh was also suggested. <br> <br> ++ To facilitate drawal of subsidised rice by the targeted group and not by any others, it was suggested to adopt the bar coded coupons being issued in Andhra Pradesh. These are scanned to arrive at the actual drawal of rice by the cardholders under different schemes. The unutilised quantity available with the fair price shop dealer with reference to the bar coded coupons scanned is reduced from the next month’s allotment. This ensures proper accounting of the stocks and eliminates the scope of diversion of stocks which was prevalent when the rice was issued on cards. <br> <br> ++ One more suggestion was that considering the high cost of holding buffer stock and low off-take at Economic Cost, both BPL and APL cardholders may be issued additional quantity of grains at less than economic cost. This would involve no additional budgetary subsidies, but would have a significant impact on the off-take of grains, viability of FPS and operational logistics of Food Corporation of India (FCI).<br> ? As an alternative to food coupons, providing food credit to consumers at lower interest rates to stock foodgrains, when prices are low and as per individual requirements, was suggested.<br> <br> • The need to monitor the public distribution system (PDS) system with the help of vigilance committees and active involvement of Civil Society to help in checking leakages by acting as watchdogs was also felt.<br> <br> • Some participants emphasised the need to be realistic in deciding BPL definition as the differences in estimates of identification of BPL families by Government of India (based on NSSO) and State governments (based on the identification by Gram Sevaks) have led to some States not being able to distribute foodgrains to BPL cardholders as per their entitlement of 35 Kgs/card/month. To streamline BPL identification, it was suggested to delink BPL identification survey from the official methodology of poverty estimates and redesign TPDS on the basis of a fresh country-wide survey. Some opined that leaving BPL fixation to states would lead to competition among states to declare more people as poor. Some others suggested that family income should be the basis of deciding BPL and not ownership of electronic goods.<br> <br> • Some recommended that incidental charges like handling and transportation charges under the Antyodaya Anna Yojana (AAY) scheme should be met by Government of India as in the absence of this, it is passed on to fair price shops (FPS), which can meet these costs only by dubious means.<br> <br> • Some suggested that States should be allowed to decide which items should be subsidised as some States want to subsidise coarse cereals to maintain regional food security. Some participants opined that coarse grains should not be included in PDS operations since their shelf life is limited and are available at lower prices to the poor.<br> <br> • To increase the viability of FPS it was stated that besides subsidised commodities being supplied through PDS, FPS dealers in Andhra Pradesh were allowed to sell other essential commodities as well. This enhances their economic viability and the consumers are able to get most of the commodities at one place at reasonable prices, free from adulteration. For financial viability of FPS, the possibility of channelising food grains to the existing beneficiaries of Food For Work Programs (e.g. SGRY) was suggested. Some States (e.g. Rajasthan) are issuing food coupons to the beneficiaries of SGRY for exchange at FPS. Improvement in this system was suggested as the beneficiaries have to wait for a long period to get their quota.<br> <br> <font color="#006633"><b>FCI and reducing inefficiencies</b></font><br> <br> The inefficiencies of FCI and those related to transport, handling, etc. were discussed. Some of the important suggestions were as follows:<br> <br> • The monopoly of FCI should be removed to help address its inefficiencies. FCI needs to be made more accountable, and reimbursed on cost norms rather than actuals.<br> <br> • To reduce other related inefficiencies the following examples of Andhra Pradesh were given which could be emulated by others. <br> <br> ++ In order to reduce the expenditure on multiple handling, transport, watch and ward, etc., the Government of Andhra Pradesh (AP) was working out a scheme, in consultation with the FCI, for movement of stocks locally procured from the rice mills directly to the Mandal Level Stockist (MLS) points of A.P. State Civil Supplies Corporation. In deficit districts, to the extent possible, direct movement from the rail head to the FPS was also under consideration. <br> <br> ++ For proper accounting of inflow and outflow of stocks in Andhra Pradesh, supply chain management was also being computerised from FCI godowns to the MLS points.<br> <br> <font color="#006633"><b>General Issues<br> </b></font><br> Some of the important general issues discussed were:<br> <br> • There is a trade-off between targeting the poor and helping the farmers from the link between MSP and PDS price.<br> <br> • There is a need to increase per capita calorie intake, which has been falling.<br> <br> • There is a need to think of a subsidy system which can enable Indian farmers to compete with USA and European countries, which give high agricultural subsidies.<br> <br> • ‘Grain Banks’ established by women farmers ensure food security for the poor. Need for greater public investment in agriculture, particularly irrigation, to increase income, reduce poverty and strengthen food security.<br> <br> • Crop insurance schemes should be streamlined. At present they do not benefit the farmers as insurance companies usually manage to get a certificate stating that monsoons have been good.<br> <br> • The need for a more liberalised and stable export-import policy for agricultural items to gain from greater market access likely to be provided by the reduction of agricultural subsidies by India’s major trading partners as a result of WTO negotiations. This could ensure better prices for agricultural commodities, thereby reducing the need for subsidies.<br> <br> • The loss in production likely to arise from diversification away from rice and wheat in states like Punjab should be made good through higher production in others states (Eastern/North-eastern states) with potential for improvement in production and productivity.<br> <br> <b>In conclusion, the need to get the best for the expenditure on subsidy account and the desirability to target subsidies to the poor and needy was agreed even though the views/modalities differed. </b><br> <br> If you want to tell the FM something on subsidy, all it takes is a mail. Do it now. <br> <br> <font color="#FF6666"><b>Until Tomorrow with more DDT<br> <br> Have a nice day. <br> <br> Mail your comments to </b></font><b>vijaywrite@taxindiaonline.com </b></font> </p> </body> </html>