114. With a view to encourage sports in the country, I also propose to reduce import duty on sports goods from 50% to 30%.

115. In order to give relief to professional press photographers I propose to allow them to import free of duty photographic equipment upto Rs.1 lakh. A similar concession is also being extended to accredited journalists for import of personal computer, typewriter and fax machine.

116. Telecommunication is a growing sector and will turn out to be the life-line of our economy. The existence of an efficient telecommunication net work is a pre-requisite for accelerated economic growth. In order to give a boost to the efforts being made by the Department of Telecommunications, I propose that the duty on parts and sub-assemblies of telecommunication equipment be reduced from 35% to 30% and on finished equipment from 50% to 40%. In order to avoid the temptation to smuggle cellular phones, pagers and trunking handsets, I propose to reduce the customs duty on them to 30%.

117. Upgradation of medical standards in the country is extremely important. I, therefore, propose to reduce the rate of duty on specified equipment, not generally made in India, and their parts from 15% to 10% and on other medical equipment from 40% to 30%.

118. Edible oils now carry a rate of duty of 30%. This is an important item of daily food for the masses and we have a chronic shortage of edible oils in the country. I propose to reduce the import duty on edible oils from 30% to 20%.

119. Mr. Speaker, Sir, earlier in my speech I dwelt on the dire need to step up investment in infrastructure. I had also detailed the sectors to which I propose to make large allocations. I have to raise resources to meet these requirements. I intend to ask importers to share the burden of building the infrastructure in this country because, ultimately, it will help raise production and enhance competitiveness. I, therefore, propose a levy of 2% as special customs duty on all imports except those that carry nil rate of duty or are imported at nil rate of customs duty for export production under the various duty free licences. This levy will not apply to gold and silver imported by eligible passengers or under special import licences. This is likely to yield about Rs.1600 crore in the current year.

120. Importers will be happy to know that the Reserve Bank of India is announcing today the withdrawal of the interest rate surcharge of 25% on import finance imposed in February, 1996.

121. I now come to my proposals regarding central excise. A large number of countries in the world today have a value added tax system which has been recognised to be the most efficient form of commodity taxation. I am glad to note that some State governments are moving towards the value added tax system. The last few years of reforms have taken us closer to having a Central VAT, but there are still certain legal obstacles.

122. Our central excise structure still has 11 ad-valorem rates. The rates range from 0 to 50 per cent. Ideally there should be only four rates of excise duties -- zero, a lower rate of excise duty on goods of mass consumption, a single normal rate on all other goods and a higher rate on luxury items. It is absolutely necessary for us to move towards this rate structure so that we put an end to wasteful litigation and have a transparent and simple tax structure. It was not possible in the time available to me in preparing this Budget to achieve this goal in the current year. However, I propose to take the first step this year and I am confident that we will achieve a four- rate excise duty structure in another year or two.

123. I propose to integrate the tax on the textile sector with the mainstream of central excise duties by introducing the Modvat principle in this sector. Hon'ble Members are aware that at present excise duties are levied at the fibre and yarn stage and there is only an additional excise duty, in lieu of sales tax, on fabrics. This is one of the most inefficient ways of taxation as it results in very high duties on inputs, which encourages evasion; it does not capture value addition; and it denies the industry an opportunity of claiming Modvat input credit on capital goods, chemicals and yarn. While modernisation of other industries is taking place speedily, our textile industry has not been able to participate fully in this process because of this lopsided tax structure. I, therefore, make the following proposals.

124. I propose to reduce the excise duty on yarn in the case of polyester filament yarn from the current level of 50% to 40% and unify the rates on other yarn at 20%, except nylon filament yarn and cotton yarn for which the present rates of 30% and 5% respectively will be retained. In order to provide Modvat for the textile sector, I propose to impose a basic excise duty of 5% on cotton fabrics and 10% on other fabrics which will be collected at the processed fabric stage. The processors would be in a position to Modvat the duty paid on yarn imputed on the basis that yarn accounts for 50% of the value of the finished fabric. I have adopted a simple procedure of imputed value to avoid the imposition of a basic duty on grey fabrics which are manufactured by thousands of powerlooms. Such powerlooms will, therefore, continue to be outside the excise net. Composite mills and textile processors will be able to avail themselves of Modvat facilities hitherto not extended to them. This restructuring of excise duty, together with the substantial reduction in customs duties on selected machinery and on inputs for the textile sector, should provide a major boost to the textile industry. I believe that this will also simplify the calculation of drawback rates for garment exporters.