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Budget 2012: Handset & LCD Duties, Aadhaar Payments, Venture Capital, Service Tax Up; Digitization Of PDS

Here are some of the major announcements from Budget 2012, related to the internet, digitization, financial inclusion, telecom, mobile, media and entertainment and related sectors: 

– Mobile based fertilizer management system: The recommendations of the task force headed by Nandan Nilekani on IT strategy for direct transfer of subsidy have been accepted. Based on these, a mobile- based Fertiliser Management System (mFMS) has been designed to provide end-to-end information on the movement of fertilisers and subsidies, from the manufacturer to the retail level. This will be rolled out nation-wide during 2012. Direct transfer of subsidy to the retailer, and eventually to the farmer will be implemented in subsequent phases, and is expected to curtail misuse of fertilizers.

– Oil Companies have launched LPG transparency portals; direct subsidy transfer: All the three public sector Oil Marketing Companies have launched LPG transparency portals to improve customer service and reduce leakage. A pilot project for selling LPG at market price and reimbursement of subsidy directly into the beneficiary’s bank account is being conducted in Mysore. A similar pilot project on direct transfer of subsidy for kerosene into the bank accounts of beneficiaries has been initiated in Alwar district of Rajasthan.

– Further integration of Aadhar with PDS & govt. schemes: The enrolments into the Aadhaar system have crossed 20 crore and the Aadhaar numbers generated upto date have crossed 14 crore. The government has proposed to allocate adequate funds to complete another 40 crore enrolments starting from April 1, 2012. The Aadhaar platform is now ready to support the payments of MG-NREGA; old age, widow and disability pensions. The Finance minister informed that the Aadhaar platform has been successfully used to validate PDS ration cards in Jharkhand. The pilot projects show that substantial economies in subsidy outgo can be achieved by the use of Aadhaar platform. The government plans to scale up and roll out Aadhaar enabled payments for various government schemes in at least 50 selected districts within the next six months. The government will allocate Rs 14232 crore to the UID project in FY 13.

To ensure that the objectives of the National Food Security Bill are effectively realised, a Public Distribution System Network is being created using the Aadhaar platform. A National Information Utility for the computerisation of PDS is being created. It will become operational by December 2012.

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– Hike in excise duty rate from 10% to 12%: The government has proposed to raise the standard rate of excise duty for non-petroleum goods, from 10% to 12%, the merit rate from 5% to 6%, and the lower merit rate from 1% to 2%. However, the lower merit rate for coal, fertilisers, mobile phones and precious metal jewellery is being retained at 1%.

– Exemption from basic customs duty for LED/LCD, Mobile phone parts:  Full exemption from basic customs duty has been granted to LCD and LED TV panels, and parts of memory card for mobile phones.

– Viability gap funding for telecom– Viability Gap Funding (VGF) under the Scheme for Support to PPP in infrastructure is an important instrument in attracting private investment into the sector. The government has decided to make fixed network for telecommunication and telecommunication towers eligible for VGF. Other sectors include irrigation (including dams, channels and embankments), terminal markets, oil and gas/LNG storage facilities and oil and gas pipelines, common infrastructure in agriculture markets, soil testing laboratories and capital investment in fertiliser sector eligible for VGF under this scheme.
New venture fund:The budget has proposed to set up a Rs 5,000 crore India Opportunities Venture Fund with SIDBI, in order to enhance availability of equity to MSME sector.

– The limitation of VC Funds to invest only in nine sectors is proposed to be removed: Following this move, more start-ups can expect to raise funds. It is further proposed to remove the cascading effect of Dividend Distribution Tax (DDT) in a multi-tier corporate structure. It is also proposed to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies to India at a lower tax rate of 15% as against the tax rate of 30% for one more year i.e. upto March 31, 2013.

– Service tax raised from 10% to 12%; Negative list to include ‘entertainment and amusement services’, exemption from service tax:  The service tax base has been expanded to all but 17 services. The negative list now includes entertainment and amusement services. Which could imply that DTH subscriptions and movie and event tickets will be exempted from service tax. Other important inclusions in the negative list comprise all services provided by the government or local authorities, except a few specified services where they compete with private sector. Business correspondents to banks and insurance companies in villages exempted from service tax. The list also includes pre-school and school education, recognised education at higher levels and approved vocational education, renting of residential dwellings, and a large part of public transportation including inland waterways, urban railways and metered cabs. Exemption from service tax on copyright recording of cinema and for independent journalists.

– National Population Register to be completed in 2 years: The scheme to create the National Population Register (NPR) is progressing well. It is likely to be completed within the next two years. The Government is also considering a proposal of issuing Resident Identity Cards bearing the Aadhaar numbers to all residents who are of age 18 years and above to help in the e-governance initiatives.

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– Financial inclusion: Out of 73,000 habitations targeted for financial inclusion via banking correspondents, 70,000 habitations have been covered, with 2.55 crore beneficiary accounts. Rest likely to be covered by March 31, 2012. As a next step, Ultra Small Branches are being set up at these habitations, where the Business Correspondents would deal with cash transactions. The campaign will be extended to habitations
with population of more than 1000 in North Eastern and hilly States and to other habitations which have crossed population of 2,000 as per Census 2011.
To introduce new law for Microfinance companies in the budget session.

Kisan Credit cards will be made smart cards: Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card
which could be used at ATMs

– GST: GST network to be set up as a National Information Utility and to become operational by August 2012

– Central KYC Depository : A central “Know Your Customer” depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep.

– Mandatory for companies to issue IPOs of Rs 10 crore and above in electronic form: Mandatory for companies to issue IPOs above Rs 10 crore electronically. Providing opportunities for wider shareholder participation in
important decisions of the companies through electronic voting facilities, besides existing process for shareholder voting, which would be made mandatory initially for top listed companies lowering their costs and helping companies reach more retail investors in small towns.

Download: Budget Highlights | Budget Speech

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