POLICY POINTERS

Bad debts no longer deductible from tax  

The amendment to Section 36(1)(vii) of the Income-Tax Act prevents companies from claiming provision for bad debts as deductible from taxable income unless the debt is actually written off. Since the amendment is with retrospective effect from April 01, 1989, this would result in several companies losing their cases, being currently fought in various income tax appellate fora, and also re-opening of returns of those who would have claimed bad debt provisioning as deductible from taxable income. Revenue department feels that the amendment was needed because allowing provision for bad debt to be deductible from taxable income without write-off of the debt could be misused for tax deferral purposes.  

The amendment was introduced as a new clause alongwith the amendments to the proposals in the Finance Bill, 2001. This amendment essentially means that provision for a bad debt cannot be treated as equal to writing off the debt for the purpose of claiming the provision as deductible from taxable income.  

Interest on corporate FDs capped at 14 percent  
The Department of Company Affairs (DCA) has capped the interest rates on FDs raised by corporates at 14 percent thus reducing it by one percentage point in order to align them with the FD rates offered by the NBFC sector.  

PM gives 5 year tax holiday for Kutch made products 
Prime Minister, Shri Atal Bihari Vajpayee on 03.06.2001 announced a five year tax holiday on products manufactured in the quake-hit Kutch district of Gujarat and asked the state government to further speed up its rehabilitation package for the affected people.  

The centre would not levy any excise duty on goods produced in Kutch for five years and concession would also be given to intermediate articles used for building construction, including cement.  

Govt. partially rolls back drawback rates 
The government had sharply cut drawback rates by 4.5 percent on exports of certain items like garments, leather items and handicraft items on 01.06.2001. There has now been a partial hike in duty drawback. On knitted readymade garments the drawback rate is now 13 percent, on babies' knitted garments it is 12.5 percent and for industrial leather it is 9 percent.  

Cargo traffic for 12 major ports estimated at 344 mt 
The projected cargo traffic for the 12 major ports of the country has been estimated at 344 million tonne (mt) during the current fiscal, which is expected to go up to 530 mt by 2006-07.  
The current traffic handled by the major ports is about 281 mt as against the installed capacity of 291 mt. The total container traffic handled by the Indian ports has shown an impressive growth at 2.5 twenty feet equivalent units (TEUs).  

Finance ministry action plan strengthens credit to women 
The finance ministry is planning to provide a major push to credit for women entrepreneurs, particularly in the small scale and tiny industries sectors. 
 
The public sector banks have been asked to redefine their lending policies by taking into account women's requirements in a focussed and integrated manner. The banks have been told to have a published charter for encouraging women customers and to start with, must earmark 2 percent of their total credit for women, which should be increased to 5 percent in due course. Women's cells should be set up at the banks' head offices and regional centres where information and counselling will be provided apart from other credit related services for women. Such cells should be headed by lady officers who will be more empathetic to their needs. Under the action plan, banks will create the necessary environment by simplifying procedural formalities in bank finance offering updated information, guidance and other credit related services to women entrepreneurs. The plan has outlined measures like redefining banks' policies/long term plans and into account women's requirements in a focussed and integrated manner. The banks have been told to have a published charter for encouraging women customers and to start with, must earmark 2 percent of their total credit for women, which should be increased to 5 percent in due course. Women's cells should be set up at the banks' head offices and regional centres where information and counselling will be provided apart from other credit related services for women. Such cells should be headed by lady officers who will be more empathetic to their needs. Under the action plan, banks will create the necessary environment by simplifying procedural formalities in bank finance offering updated information, guidance and other credit related services to women entrepreneurs. The plan has outlined measures like redefining banks' policies/long term plans and setting up women's cells. 

GDP growth rate for 2000-01 lowered to 5.2% 
The advance estimates (AE) for gross domestic product (GDP) growth rate at constant prices for 2000-01 have been revised downwards to 5.2 percent against the earlier estimate of 6.0 percent. The GDP, as per revised estimates (RE) has been pegged at Rs.12,11,747 crore, down from the Rs.12,21,174 crore reported in the AE released in January this year. This downward revision will push up the fiscal deficit figure for 2000-01 to almost 5.7 percent of the GDP as against the budgetary target of 5.1 percent. It will also bring down the average GDP growth rate in the first four years of the Ninth Five Year Plan period (1997-98 to 2001-02) to 5.75 percent as compared to the target of 6.5 percent. The average GDP growth rate during the Eighth Plan was 6.8 percent, against the target of 7 percent.