Giving break to the industry reeling under the blow of slowdown, the government today reduced the rates of excise duty and service tax.

As the general excise duty has been reduced from 10 per cent to 8 per cent, the rate of service tax has been cut from 12 per cent to 10 per cent.

Four per cent excise cut announced prior in the incentive package in December will continue beyond March 31, Finance Minister Pranab Mukherjee said while winding up the debate on the Interim Budget in the Lok Sabha today.

The Lok Sabha later accepted the Interim Budget by voice vote, amidst a walkout by the Opposition BJP and erstwhile supporters Left parties.

Mukherjee said that duty on bulk cement has been reduced from 10 per cent to 8 per cent.

Mukherjee further said that excise duty on bulk cement which was 10 per cent (or Rs 290 per tonne, whichever is higher) has been reduced to 8 per cent (or Rs 230).

The duty allowance on naphtha for manufacture of power sector, he said, will persist beyond March 31, 2009.

The anomalies faced by suppliers to Special Economic Zone with regard to treatment of export profits will be addressed in the regular budget, he said.

As regards the states, Mukherjee said as part of the stimulus package they have been permitted to borrow an extra 0.5 per cent of the Gross State Domestic Product (GSDP). The exception, he added, will persist in the next fiscal.

Brushing aside the disapproval that government had not done adequate for the industry, Mukherjee said it was vital to stick to Parliamentary norms and constitutional propriety at a time when the term of the present government was about to end.
“It is not possible for me to indulge into financial profligacy without adequate resources”, he said.

Though, he added, dissimilar measures taken by the government and the Reserve Bank must be given time to have an impact on the economy.

Sufficient liquidity has been pumped into the system to allow banks to regulate their interest rates, he said.

Since September, RBI has injected about Rs 4 lakh crore into the system and abridged a variety of key policy rates following which several banks have started reducing interest rates.