The Union Cabinet is expected to approve a slew of tax measures next week to give concessions to the liquor industry, reduce the rate of interest on tax refunds and approve a tax regime for special economic zones.

But despite the Cabinet approval, the measures may have to be levied through an ordinance amending the Finance Act, as the monsoon session of Parliament is due to end soon.

Finance Minister Jaswant Singh is also expected to announce a couple of other steps including allowing the the Commerce Ministry to manage the tax issues relating to SEZs.

While the issue of tax treatment for pension products is also to be decided, the finance ministry is expected to await the approval of the Cabinet for setting up a pension regulator, before amending the legislations.

The Finance Act for this year had extended the scope of tax collection at source to cover liquor manufacturers and sale of scrap, besides forest products.

Under section 206 of the Income Tax Act 1961, the income-tax department has the right to levy a 10 per cent tax on the sale of these goods from the manufacturers of these goods when they sell the same to the retailer.

But because of numerous exceptions, there was hardly any realisation from the same. The department expects to gain about Rs 500 crore (Rs 5 billion) from the measure.

While the Budget 2003 amended the section, it could not be implemented as both liquor manufacturers and scrap sellers like steel companies contested that the tax rate of 10 per cent presupposed a profitability level of about 30 per cent, which they felt was too high.

The ministry had accordingly deferred the implementation of the provision till September 30. The Cabinet is expected to approve reducing the tax rate to 3 per cent.

The Centre is also expected to ratify the decision by the finance ministry to calibrate the rate of interest on refunds with that of comparable government securities. This will close the tap of higher than market returns for corporates who therefore pay more than estimated additional advance tax.

In a bid to give a leg up to the fledgling SEZs, the finance minister is also expected to end the long running discord between the revenue department and the commerce ministry by allowing the latter to administer the tax concessions for the SEZs.

The revenue department had objected to the proposal saying that as per the rules of business, tax  issues lay squarely with them.