Micro Units Development and Refinance Agency (Mudra) Bank

According to the NSSO survey of 2013, there are 5.77 crore small business units, mostly individual proprietorships, which run small manufacturing, trading or services activities. Most of these ‘own account enterprises’ are owned by people belonging to Scheduled Caste, Scheduled Tribe or Other Backward Classes. Only 4% of such units get institutional finance. Providing access to institutional finance to such micro/small business units would turn them into strong instrument of GDP growth and also employment. Micro Finance is an economic development tool whose objective is to assist the poor to work their way out of poverty. It covers a range of services which include, in addition to the provision of credit, many other services such as savings, insurance, money transfers, counseling etc. The players in the Micro Finance sector can be qualified as falling into 3 main groups:- the SHG-Bank linkage model started by NABARD, the Non Banking Finance companies and the others including Trusts, Societies etc. The government proposes to set up a Micro Units Development and Refinance Agency (MUDRA) Bank through a statutory enactment. This Bank would be responsible for regulating and refinancing all Micro-finance Institutions (MFI) which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities. The Bank would partner with state level/regional level co-ordinators to provide finance to Last Mile Financer of small/micro business enterprises. The MUDRA Bank would primarily be responsible for – 1)    Laying down policy guidelines for micro/small enterprise financing business 2)    Registration of MFI entities 3)    Regulation of MFI entities 4)    Accreditation /rating of MFI entities 5)    Laying down responsible financing practices to ward off indebtedness and ensure proper client protection principles and methods of recovery 6)    Development of standardised set of covenants governing last mile lending to micro/small enterprises 7)    Promoting right technology solutions for the last mile 8)    Formulating and running  a Credit Guarantee scheme for providing guarantees to the loans which are being extended to micro enterprises 9)    Creating  a good architecture of Last Mile Credit Delivery to micro businesses under the scheme of Pradhan Mantri Mudra Yojana A sum of Rs 20,000 crores would be allocated to the  MUDRA Bank from the money available from shortfalls of Priority Sector Lending for creating a Refinance Fund to provide refinance to the Last Mile Financers. Another Rs 3,000 crore would be provided to the MUDRA Bank from the budget to create a Credit Guarantee corpus for guaranteeing loans being provided to the micro enterprises.

Changes proposed in priority sector lending (psl)-regarding

Since the vision of Priority Sector Lending (PSL) first took shape, the structure of the Indian economy, the contribution by various sectors to GDP and the demographic profile has changed significantly. These emerging realities have also shaped the perception of national priorities. Total credit extended by Banks in Priority sector Lending is Rs.2154356.29 Crore. There is a need to increase employment, create basic infrastructure and improve competitiveness of the economy, thus creating more jobs. It is, therefore, time to re-orient the Priority Sector Lending Guidelines towards today’s growth and inclusion agenda.             The following changes are being proposed in the Priority Sector lending:- ·       To enhance credit to Small and marginal farmers, a separate sub limit of upto 8% (for 1st year - 7% and 2nd year - 8%) is being introduced for the first time. ·       Loans for agri-processing & agri-infrastructure would be included in PSL without any limit on the size of loans. ·       Loans to Medium Enterprises being included in PSL. ·       For the first time a separate sub limit of 7.5% of ANBC is being created for the Micro Enterprises. ·       Loans upto Rs.5 crore for Social infrastructure, like schools and health care facilities, drinking water facilities, sanitation facilities etc. are being included under PSL, for towns of less than 1 lac population. ·       Renewable Energy sector is being added to the PSL, upto Rs.10 crore loans. ·       Introduction of Priority Sector Lending Certificate (PSLCs), which will provide a market-driven incentive for efficiency, will enable banks to sell their surplus lending and thus earning a premium for their efficiency/geographical spread. ·       Progress to be monitored quarterly and not at the end of the year.

Decoding the Budget's '#carbontax'

Finance Minister Arun Jaitley in Budget 2015 delivered a first. India has accepted that it has a de facto carbon tax — on petroleum products and on dirty coal. In fact, arguably the only big green initiative of this Budget is the increase of the cess on coal — from Rs 100 a tonne to Rs 200 a tonne.

The question to ask is if this carbon tax – imposed on the carbon content of fuel – is doing what it should. Is it reducing the greenhouse gas emissions that are responsible for climate change? In other words, is there a design behind the carbon tax to ensure that we move beyond polluting fossil fuels?


The Budget takes its lesson from the Economic Survey, which states that high prices of diesel and petrol are important price signals to limit consumption and, hence, carbon dioxide(CO2) emissions and other externalities like congestion costs and air pollution. In 2014, taking advantage of the global fall in fuel prices, subsidy or under-recovery has gone and government has increased excise duty on both petrol and diesel. So even though fuel is cheaper, the tax component is higher. The Economic Survey estimates that based on emission factors currently, India imposes an implicit carbon tax of $140 a tonne of CO2 on petrol and $64 on diesel.

The Economic Survey also estimates that the cess on coal of Rs 100 a tonne of coal is equivalent to a carbon tax of $1 a tonne of CO2. It argues that this cess should be increased, so that it can lead to CO2 reduction and also better reflect the health cost of emissions from coal-fired power plants. It calculates that a threefold increase from the current cess would lead to an annual CO2 emission reduction of 129 million tonnes — this is equal to seven per cent of India’s current emissions. A fivefold increase in the cess would equalise the domestic coal price with the international price, and would contribute to annual CO2 emission reduction of 214 million tonnes, which is 11 per cent of India’s annual emissions.

In Budget 2015, the finance minister has opted to take the slow road and has doubled the cess on coal to “balance the need to tax pollution and the price of power” in his words. He also mentions that India’s de facto carbon tax on most petroleum products compares with international norms. But is this tax an adequate signal to bring about change?

Let’s take petrol and diesel. The fact is that the government has increased tax on fuel because it is convenient and opportune. It will be important to maintain this “carbon tax” even when prices of petrol and diesel increase in the international market. But that said, it is also a fact that the prices of these fuels are lower today and, so as far as the consumer is concerned, the signal to change consumption is weak and inadequate.

Therefore, not only does the government need to tax this polluting fuel, it also needs to use the funds and much more to provide infrastructure to wean us away from driving cars or using roads to transport goods.

But Budget 2015 is doing the reverse. It says that it will set aside Rs 4 a litre of the excise duty on petrol and diesel for a dedicated road cess. This tunnel vision, viewing infrastructure for transport only as “roads” – in cities and on highways – is regressive. Instead, what is needed is to reinvent mobility so that it moves goods and people, and not vehicles. This would require massive investment in augmenting public transport in cities; building infrastructure for walking, cycle, bus and metro, and not for cars.

The fact is that Budget 2015 has recognised that this excise duty is a carbon tax, which is putting a price on each tonne of CO2 emitted. This tax must be used to help shift to less carbon-intensive ways of production.

We also know that health costs of air pollution are deadly across the country. Budget 2015 does little to address this concern. It does not say that the excise duty collected on dirty fuel will be used to upgrade refinery technology, so that we can get clean fuel and breathe easy. It is also a fact that even though the government is no longer subsidising diesel, its price remains lower than petrol, mainly because of differential levels of taxation. So even though there has been a decline in the number of diesel private cars being sold, it is not enough to make a dent in deadly pollution levels. Therefore, what is needed is to tax diesel vehicles to equalise the price differential.

This is also the case with the coal cess. The government now aims to use this cess to clean the Ganga or build toilets. All this is important, but takes away from the objective of moving us away from using polluting fuels or cleaning up emissions from thermal power plants to reduce health costs. The coal cess has to be used to provide the biggest climate-change game changer for India — to provide affordable and clean power to the millions who even if connected to the grid do not have energy to light homes or cook food.

What is needed is to walk the talk. Not just talk the talk.

A welfare-oriented Budget

The latest Budget of the Government of India is heavily welfare-oriented. The various schemes of social security, especially for the unorganised sector, and the enhancement of the limits for tax concessions will certainly be beneficial to the common man. There may be a disappointment that there are no changes in the exemption limits for individual income tax or in the tax brackets, though they may be justified by the high level of inflation that has prevailed in the recent years and the bracket creep that has taken place due to increases in nominal, and not real, incomes. It is in this context that the proposal to reduce corporate tax rates from 30 per cent, existing in the last 10 years, to 25 per cent over the next four years, starting April 2016, needs to be taken note of. Finance Minister Arun Jaitley said the process of reduction has to be necessarily accompanied by rationalisation and removal of various tax exemptions and incentives for corporate taxpayers, which incidentally account for a large number of tax disputes. This is a step towards the ideal flat tax rate system, where there is only one rate for all incomes without any provisions for tax rebates, income deductions or exemptions.

Jaitley said that exemptions to individual taxpayers would still continue since they facilitate savings, which get transferred to investment and economic growth. There is enough evidence to show that the level of savings is influenced by income and not yield or return on investment. Once the level of savings is determined, its disposition in various avenues of investment only is influenced by the relative returns. Did not the individual save before there was any institutional arrangement for mobilising savings by paying an interest? People used to keep their savings under mattresses! The theory of savings in India is influenced by Western ideas. Unlike there, we still have a family system where the head desires to leave wealth for posterity.


Jaitley could have very well envisaged a flat rate system for individual taxation also. An official committee, which went into this issue a few years ago, gave it a cursory examination and did not review the experience in a number of other countries while rejecting the proposal. I have shown in my past articles on the subject how the flat tax is also progressive in as much as the average tax rate goes up with a rise in incomes. The current emphasis in progressive taxation is on marginal tax rates, which gets diluted because of various devices such as exemptions. A flat tax already prevails in about 20 countries, including Russia, where it is reported to have resulted in a significant growth in tax revenues. It will make the tax structure simple and encourage people to file returns. Tax assessment and refunds will be quicker. Fiscal incentives by way of deductions and exemptions distort the flow of investments. I suggest that the finance minister commission a paper on the subject for a wide discussion, so that it could be considered for introduction in the Budget for 2016-17.

Jaitley said the move on the reduction in corporate rates will lead to a higher level of investment, higher growth and more jobs. A higher level of investment will depend on higher level of demand for goods and services. There is a slack in demand due to the high level of prices to which not much attention is paid. Instead, the emphasis is on inflation rate. When the prices of common goods such as shoes are high, a pair of the cheapest variety selling at Rs 1,500, it is no consolation to be told that the price rise over the last year is only 5 per cent. What is needed for corporate growth are incentives for expenditure on research and development and introduction of modern machinery through, say, accelerated depreciation provisions.

To give an example, the textile industry is crying for modernisation that would reduce the cost of production. There is no encouragement for the replacement of the old machinery by new because of the high cost of clothing that is seen in the subdued sales even during the festival season. I remember reading a survey report a few years ago that said that farmers, when they find higher incomes due to a good monsoon, spend the additional incomes first on the repayment of the debt owed to the private agencies and then on clothes. It may be true today also.

#BankingReforms

Performance of Public Sector Banks has remained sub-optimal so far.  The Government is taking various steps to improve the situation both on governance side and otherwise.  The focus of these reforms is to improve the quality of deliberations in bank boards, leading to better asset quality and further resulting in better market valuations. What has been done (i)   Separation of the post of Chairman and Managing Director. (ii)  Enabling provision for the appointment as MD & CEO in five major banks, so that wider choice is available.  Both Public Sector and Private Sector bankers can apply.  Higher salary can be given in appropriate cases. (iii)  Revamping of present selection system which inter-alia includes structured three separate interviews, allotment of banks on merit-cum-preference basis. (iv)  Blue print for road map for reforms on the basis of deliberations carried out in GyanSangam, a two days top level retreat organised by the department. (v)   Allocation of capital purely on the basis of efficiency parameters so that banks start focusing on these. (vi)  Clear instructions from the department regarding no interference whatsoever in any matter whether related to HR issues or credit decisions or even otherwise. What Next   (i)      In order to improve the Governance of Public Sector Banks, the Government intends to set up an autonomous Bank Board Bureau with professionals as its members.  It would be responsible for search and selection of heads of PSBs, as also for Non-Official Directors on the Boards of Banks.  This would be an interim step towards moving in the direction of having a Bank Investment Company. (ii)      Guidelines relating to appointment of non-official directors is being revisited to ensure that bank boards get people with relevant expertise.  Anybody eligible would be able to apply through a website which will soon be available in the public domain. (iii)     Government’s role in relation to public sector banks is that of promoter.  As a promoter, the banks have been entering into anMoU for achieving certain objectives known as Statement of Intent.  The whole system of Statement of Intent is being revised with provision for higher cash incentives. (iv)  Government wants to encourage Bank Boards to restructure their business strategy and also suggest way forward for their consolidation and merger with other banks if it is win-win for both.

budget proposals 2015-16 for Petroleum & Natural Gas sector

Various proposals have been made in the Budget 2015-16 which would lead to greater stability, clarity and continuity in the economy and the petroleum and natural gas sector. Subsidies will continue so that there is no adverse impact on the general public. As stated by the Finance Minister, the Government is committed to the process of rationalizing subsidies and cut leakages, not cut subsidies. Adequate funds have been provided for LPG and kerosene subsidies. Finance Minister appealed to the well off strata, including those concerned for the welfare of the poor, to voluntarily give up subsidy on LPG. In context of rationalization and targeting of LPG subsidy, it was highlighted that under DBTL Rs.6335 crore have been transferred to over 11.5 crore beneficiaries. There is revision in specific rates of excise duty on petrol and diesel only to the extent of subsuming the quantum of education cess levied, keeping the total incidence of excise duty unchanged. Further, the effective rates of additional excise duty levied on petrol and diesel is proposed to be increased from Rs.2 per litre to Rs.6 per litre to fund investment in roads and other infrastructure to the extent of Rs.40,000 crore. In order to ensure energy security in the country, strategic crude oil underground storage reserves of 5.33 MMT are being set up by Indian Strategic Petroleum Reserves Limited (ISPRL) at Visakhapatnam, Padur and Mangalore. An amount of Rs.2,400 crore has been provided under the Plan head in 2014-15 (RE) for filling crude oil in the caverns. An amount of Rs.72589 crore is proposed to be allocated in 2015-16 as Plan capital expenditure by oil and gas Central public sector enterprises from the internal and extra budgetary resources (IEBR) of the companies for projects for exploration and production, refining & marketing, petro chemicals and engineering. It has been proposed to reduce the rate of corporate income tax from 30% at present to 25% in the next 4 years. It is expected that this would lead to higher investment and growth in the sector. In order to boost investment in infrastructure, a National Investment and Infrastructure Fund is being established. The PPP mode of infrastructure development would be revitalized. It is expected that this would invite investment for the petroleum and natural gas sector.

#Newschemes of budget 2015-16

ATAL Innovation Mission (AIM) to be Set up

The Union Finance Minister Shri Arun Jaitley has stated his intentions to establish the ATAL Innovation Mission(AIM) in NITI. Presenting the General Budget 2015-16 in the Lok Sabha here today, the Finance Minister stated that AIM will be an Innovation Promotion Platform involving academics, entrepreneurs and researchers and draw upon national and international experiences to foster a culture of innovation, R&D and scientific research in India. Shri Jaitley said that the platform will also promote a network of world-class innovation hubs and Grand Challenges for India. Initially a sum of Rs.150 crore wail be earmarked for this purpose Self Employment and Talent Utilisation (SETU) to be Established Government has announced the setting up of a Self- Employment and Talent Utilisation (SETU) mechanism. Presenting the General Budget 2015-16 in the Lok Sabha here today, the Union Finance Minister Shri Arun Jaitley stated that SETU will be a Techno-Financial, Incubation and Facilitation Programme to support all aspects of start up businesses, and other self-employment activities, particularly in technology-driven areas. An amount of Rs.1000 crore is being set up initially in NITI Aayog for SETU. Corporate Tax to be Reduced and GST to be Implemented The Finance Minister Shri Arun Jaitley has said that the Corporate Tax Rate is proposed to be reduced from the current 30% to 25% over the next 4 years. In his Budget Speech in the Lok Sabha here today, Shri Jaitley said this is expected to lead to higher level of investment, higher growth and more jobs. The Minister however said that the reduction has to be accompanied by rationalization and removal of various kinds of exemptions and incentives which is leading to a large number of tax disputes. He pointed out that the effective collection of Corporate Tax today is about 23% National Investment and Infrastructure Fund to be Set up The Union Finance Minister Shri Arun Jaitley has announced the setting up of a National Investment and Infrastructure Fund (NIIF). Presenting the General Budget 2015-16 in the Lok Sabha here today, the Finance Minister stated that an annual flow of Rs.20,000 crore will be ensured for the NIIF. This will enable the Trust to raise debt, and in turn, invest as equity, in infrastructure finance companies such as IRFC and NHB. The infrastructure finance companies can then leverage this extra equity, manifold.  Public Debt Management Agency (PDMA) to be Set Up A Public Debt Management Agency (PDMA) will be set-up which will bring both India’s external borrowings and domestic debt under one roof. Presenting the General Budget 2015-16 in the Lok Sabha here today, the Union Finance Minister Shri Arun Jaitley stated that deepening of the Indian Bond market is one vital factor in promoting investment in India. The process of bringing the Indian Bond Market at the same level as India’s world class equity market is proposed to be initiated by setting-up PDMA.  Forwards Markets Commission to be Merged with Sebi The Union Finance Minister Shri Arun Jaitley has proposed to merge the Forwards Markets Commission with SEBI to strengthen regulation of commodity forward markets and reduce wild speculation. Enabling legislation, amending the Government Securities Act and the RBI Act is proposed in the Finance Bill, 2015. It has also been proposed to amend through the Finance Bill, Section 6 of FEMA to provide that control on capital flows as equity will be exercised by the Government, in consultation with the RBI.  A Trade Receivables Discounting System (TReDS) an Electronic Plateform for Financing of Trade Receivables of MSMES Comprehensive Bankruptcy Code for Ease of Doing Business The Finance Minister, Shri Arun Jaitely presenting the Union Budget 2015-16, here today said that a significant part of the working capital requirement of a MSME arises due to long receivables realization cycles and we are in the process of establishing an electronic Trade Receivables Discounting System (TReDS) financing of trade receivables of MSMEs, from corporate and other buyers, through multiple financiers. This should improve the liquidity in the MSME sector significantly.  Universal Social Security System for all Specially the Poor and the Under-Privileged: Soon-To-Be-Launched Pradhan Mantri Suraksha Bima Yojana The Atal Pension Yojana Launched   The Prahan Mantri Jeevan Jyoti Bima Yojana Announced Scheme to Subsidize the Premiums of Vulnerable Groups Such as Old Age Pensioners, BPL Card-Holders, Small and Marginal Farmers and Others Integrated Education and Livelihood Scheme ‘Nai Manzil’ will be Launched for Minorities             The Union Finance Minister, Shri Arun Jaitely presenting the Union Budget 2015-16, here today said that a large proportion of India’s population is without insurance of any kind – health, accidental or life worryingly, as our young population ages, it is also going to be pension-less. Encouraged by the success of the Pradhan Mantri Jan Dhan Yojana, the Finance Minister proposed to work towards creating a universal social security system for all Indians, specially the poor and the under-privileged.             Shri Jaitley said that soon Pradhan Mantri Suraksha Bima Yojana will be launched to cover accidental death risk of Rs. 2 lakh for a premium of just Rs. 12 per year. Similarly, we will also launch the Atal Pension Yojana, which will provide a defined pension, depending on the contribution, and its period. To encourage people to join this scheme, the Government will contribute 50% of the beneficiaries’ premium limited to Rs. 1,000 each year, for five years, in the new accounts opened before 31st December, 2015.             The Finance Minister further said that the third Social Security Scheme that is to announce is the Pradhan Mantri Jeevan Jyoti Bima Yojana which covers both natural and accidental death risk of Rs. 2 lakhs. The premium will be Rs. 330 per year, or less than one rupee per day, for the age group 18-50.             Shri Jaitley said that there are unclaimed deposits of about Rs. 3,000 crore in the PPF, and approximately Rs. 6,000 crore in the EPF corpus. The Finance Minister proposed the creation of a Senior Citizen Welfare Fund, in the Finance Bill, for appropriation of these amounts to a corpus which will be used to subsidize the premiums of vulnerable groups such as old age pensioners, BPL card-holders, small and marginal farmers and others. Shri Jaitley informed that a detailed scheme would be issued in March.             The Finance Minister further said that special regard needs to be paid to the population of senior citizens in the country which is now approximately 10.5 crore, out of which over one crore are above the age of 80 years. 70% live in rural areas and a large number are in the BPL category. A sizable percentage of them also suffer from age related disabilities. The Finance Minister proposed a new scheme for providing Physical Aids and Assisted Living Devices for senior citizens, living below the poverty line.             Shri Jaitley said that in sum, these social security schemes reflect our commitment to utilize the Jan Dhan platform, to ensure that no Indian citizen will have to worry about illness, accidents, or penury in old age. Being sensitive to the needs of the poor, under-privileged and the disadvantaged, my Government also remains committed to the ongoing welfare schemes for the SCs, STs and Women. Despite serious constraints on Union finances, allocations made this year are as follows:                         SC                   Rs. 30,851 crore                         ST                    Rs. 19,980 crore                         Women            Rs. 79,258 crore             The Minister announced an integrated education and livelihood scheme called ‘Nai Manzil’ will be launched this year to enable Minority Youth who do not have a formal school-leaving certificate to obtain one and find better employment. Further, to showcase civilization and culture of the Parsis, the Government will support, in 2015-16, an exhibition, ‘The Everlasting Flame’. Micro Units Development Refinance Agency (MUDRA) Bank Set up for Small Enterprises in Lending Priority was Given to SC/ST Enterprises The Union Finance Minister, Shri Arun Jaitely presenting the Union Budget 2015-16, here today, said that our government firmly believes that development has to generate inclusive growth. While large corporate and business entities have role to play, this has to be complemented by informal sector enterprises which generate maximum employment the Minister added. There are some 5.77 crore small business units, mostly individual proprietorship, which run small manufacturing, trading or service businesses. 62% of these are owned by SC/ST/OBC. Shri Jaitley further said that these bottom-of-the-pyramid, hard-working entrepreneurs find it difficult, if not impossible, to access formal systems of credit. Shri Jaitley therefore, proposed to create a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs. 20,000 crore, and credit guarantee corpus of Rs. 3,000 crore. MUDRA Bank will refinance Micro-Finance Institutions through a Pradhan Mantri Mudra Yojana. In lending, priority will be given to SC/ST enterprises. These measures will greatly increase the confidence of young, educated or skilled workers who would now be able to aspire to become first generation entrepreneurs; existing small businesses, too, will be able to expand their activities. The Finance Minister further said that just as we are banking the un-banked, we are also funding the un-funded. Distinction Between Different types of Foreign Investments Done Away to Simplify the Procedure for Indian Companies to Attract Foreign Investment The Union Finance Minister Shri Arun Jaitley has proposed to do away with the distinction between different types of foreign investments, especially between foreign portfolio investments and foreign direct investments, and replace them with composite caps. Presenting the General Budget 2015-16 in the Lok Sabha here today, the Union Finance Minister Shri Arun Jaitley stated that this was being done to further simplify the procedures for Indian companies to attract foreign investments. The sectors which are already on a 100 percent automatic route would not be affected.  Paramparagat Krishi Vikas Yojna to be Fully Supported Pradhanmantri Gram Sinchai Yojana to Provide ‘Per Drop More Crop’ The Finance Minister, Shri Arun Jaitely presenting the Union Budget 2015-16, here today, said that “Our commitment to farmers runs deep. We have already taken major steps to address the two major factors critical to agricultural production: soil and water”. In order to improve soil health, Union Minister propose to support Agriculture Ministry’s organic farming scheme – “Paramparagat Krishi Vikas Yojana”. Shri Jaitely said the Pradhanmantri Gram Sinchai Yojana is aimed at irrigating the field of every farmer and improving water use efficiently to provide ‘Per Drop More Crop’.The Budget provides for alllocation of Rs. 5,300 crore to support micro-irrigation, watershed development and the Pradhan Mantri Krishi Sinchai Yojana.The Minister urged the States to chip in substantially in this vital sector.  Tax Measures Announced to Promote Swachh Bharat Initiatives and Public Health. The Central Government will impose a Swachh Bharat Cess on all or certain taxable services at a rate of 2% from a date to be notified. The Finance Minister Shri Arun Jaitley announced in his Budget Speech that the proceeds from this Cess would be utilized for Swachh Bharat initiatives. In a related development, the Scheduled rate of Clean Energy Cess levied on coal lignite and peat is being increased form Rs. 100 per tonne to Rs. 300 per tonne. The effective rate of Clean Energy Cess is being increased from Rs. 100 per tonne to Rs. 200 per tonne. Similarly, Excise duty on sacks and bags of polymers of ethylene other than for industrial use is being increased from 12% to 15%. Concessional customs and excise duty rates on specified parts of Electrically Operated Vehicles and Hybrid Vehicles, presently available up to 31.03.2015, is being extended up to 31.03.2016. To promote public health, Excise duty on cigarettes is being increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths. Similar increases are proposed on cigars, cheroots and cigarillos. Maximum speed of packing machine is being specified as a factor relevant to production for determining excise duty payable under the Compounded Levy Scheme presently applicable to pan masala, gutkha and chewing tobacco. Excise duty on chassis for ambulances is being reduced from 24% to 12.5%.  Corporate Tax to be Reduced and GST to be Implemented; Gaar Deferred by Two Years The Finance Minister Shri Arun Jaitley said that to give a fillip to growth, investment and promotion of domestic manufacturing and ‘Make in India’, aiming at job creation, a series of measures are included in the budget. In his Budget Speech in the Lok Sabha here today, Shri Jaitley said Tax ‘pass through’ is proposed to be allowed to both Category-I and Category-II Alternative Investment funds, so that tax is levied on investors in these funds and not on the funds per se. The Finance Minister Shri Jaitley said the measure will step-up the ability of these funds to mobilize higher resources and make higher investments in small and medium enterprises, infrastructure and social projects and provide the much required private equity to new ventures and start-ups. He also said the Permanent Establishment (PE) norms are to be modified to encourage offshore fund managers to relocate to India. The modification will be to the effect that mere presence of a fund manager in India would not constitute PE of the offshore funds, as this is resulting in adverse tax consequences currently. The Finance Minister also announced deferment of the General Anti Avoidance Rule (GAAR) by two years to accelerate the momentum of investment sentiment in the country, which he said, has turned positive now. Further, to facilitate technology inflow to small businesses at low costs, the rate of income tax on royalty and fees for technical services is to be reduced from 25% to 10%. Another step for boosting employment opportunities announced is that all business entities will be eligible for the benefit of deduction for employment of new regular workmen of 50 rather than 100 employees.