Govt may rationalise excise duty

Govt may rationalise excise duty
ENS ECONOMIC BUREAU

NEW DELHI, FEB 4: Finance ministry is looking at the possibility of introducing two-rate excise structure in a bid to rationalise duties without sacrificing significant revenues.

As per the proposal being considered by the ministry, there will be an higher excise slab in addition to the central rate of 16 per cent. Although an increasing number of items will be converged to fall under 16 per cent CENVAT to minimise classification problems, the slab which will attract higher rate will help in balancing revenue losses.

According to sources, it is neither possible nor economically desirable to tax all the items, irrespective of whether the user has the capacity to pay or not, at 16 per cent. The rationalisation of excise duties has also assumed significance this time in view of the lifting of the quantitative restrictions. The domestic producers will have to compete with imported goods and the fiscal concessions will aim at helping them produce goods at competitive costs.

Presently, while most of the goods are taxed at the central rate of 16 per cent, the effective rate for items in higher slabs vary from 24 to 40 per cent. The items falling higher tax slabs attract Special Excise Duty (SED) which are 8 per cent, 16 per cent and 24 per cent.

The items which attract an effective excise duty of 40 per cent are panmasala, aerated water, chewing tobacco and motor vehicles for less than six persons. The goods which are taxed at 32 per cent are cosmetics and toiletries, tyres, polyseter yarn, air conditioners and motor vehicles for 2-12 per cent. Items like cement, carpets and floor coverings are taxed at 24 per cent. On the other hand, items like cotton and wool yarn and kerosene attracts lower rates.

In addition there is also a multiplicity of levies that include, apart from the excise rate structure, additional excise duty (goods of special importance) in lieu of sales tax on sugar, fabrics and tobacco, additional duty on motor spirit and diesel, additional duty on textiles and textile articles under the subsidy scheme for controlled cloth and cesses leviable under miscellaneous enactments. These complications have also being adding to administrative problems and resulting in loss and delay in realisation of revenue. As per the present structure separate accounts have to be maintained for each levies.