Assistant Minister for Finance Dr Rup Jyoti

Assistant Minister for Finance Dr Rup Jyoti (File Photo)
The government on Saturday issued the ‘Finance Ordinance 2006′, giving continuity to the budget estimates made public in July 2005.

Releasing the Finance Ordinance at the Finance Ministry, Minister of State for Finance, Dr Roop Jyoti, said that except for some changes in revenue policy, no major changes have been made in the budget estimates of 2005/6 presented six months earlier.

“There has been no significant change in the objectives, bases and the fundamental policies of the budget and the accompanying different fiscal ordinances presented on July 16, 2005 which was formulated with a focus on the spirit and letters of the historical step taken by His Majesty the King on February 1, 2005, 21-point program issued by His Majesty’s Government and Tenth Plan goal of poverty alleviation,” the minister said, adding “There has been some change in the revenue policy as stated in the Finance Ordinance with a view to addressing the needs of the changing times.”

The Finance Ordinance, Jyoti explained, aims to effectively implement the 21-point program announced by the King on February 1 last year. “I would also like to state that the present Finance Ordinance has made specific arrangements for corruption control, greater transparency, private sector development, consumer participation in economic activities, tourism, and foreign employment and for the promotion of domestic industries.”

The mid-term ordinance budget has incorporated necessary reforms in the revenue system so that the country’s commitments in World Trade Organisation (WTO), BIMSTEC and South Asian Free Trade Agreement 9SAFTA) could be addressed, he said.

In the Finance Ordinance, arrangements have been made to bring traders with a monthly turnover of Rs 200,000 into the Value Added Tax (VAT) net, abolishing the VAT on service business by foreign employment providers. In place of VAT, 2 percent excise on invoiced amount will be imposed.

Similarly, as per the new provision, 5 percent excise duty will be applicable on health services instead of 13 percent VAT previously levied on this service while VAT has been exempted for woollen carpets, weaving and washing and raw materials imported by pharmaceutical industries.

Custom tariff has been reduced in this Finance Ordinance in more than 100 import items. According to the minister Jyoti, slashes in customs duty were made “with a view to increasing honesty in revenue sector, increasing compliance and implementing VAT in retail level effectively.”

However, the minister announced to increase customs duty of petrol by Rs 4 per litre while Rs 1 has been reduced on diesel per litre. Similarly, duty on aviation fuel has been increased to Rs 2.10 from Rs 1.29 per litre and duty on kerosene has been increased to Rs 2.10 from Rs 0.80 per litre.

On the income tax front, the present rate of 10 percent tax deduction at source for payment of commission by a resident company to a non-resident company has been slashed to 5 percent, while taxpayers having tax arrears have been given three-month deadline to clear their arrears.

His Majesty King Gyanendra promulgated four ordinances today – Finance Ordinance 2006, Appropriation Ordinance, National Debt Ordinance, Loan and Guarantee Ordinance and Finance Ordinance 2006 with some amendments, giving continuity to the ordinances promulgated in July last year.

Jyoti’s predecessor Madhukar Shumsher Rana had presented Rs 127 billion budget for the fiscal year 2005/6.