Budget May Bring Host of Exempt Items Under Excise Duty Ambit

The government may bring a host of items, such as non-instant coffee, photographic plates, printed books and brochures, under the excise duty net in the Budget 2012-13. Currently, a long list of "excisable items" fall under the zero-tax bracket and it is likely that government may put several of these items under the excise regime. This is in line with the policy of reducing the number of items on the exempt list.

"There is a need to expand the excise duty base as reduction in tax on petroleum products has hampered collections. The duty mop-up is also under stress due to a general slowdown in the industrial activity," an official source said.

The rate is likely to be 1% (without facility of cenvat credit) or 5% (with cenvat credit). Some of the other items that could attract excise duty from next fiscal include raw silk, papad, cinematographic film exposed and developed, some leather items and raw silk.

The overall excise mop-up declined in September and November last year, but the collection rebounded in December by 9.7% to R12,546 crore. For the April-December period, excise collection has grown 8% to R93,000 crore. This is below the budget estimate of a 15% rise in indirect taxes collection during 2011-12.

Ernst & Young tax partner Saloni Roy said, "We should broad-base the tax structure and lower the rates. There should be only few exemptions."

In the last Budget, finance minister Pranab Mukherjee had brought 130 items under the tax net by levying 1% tax. Most of these were consumer goods. The government had announced a slew of stimulus measures in the form of excise duty cuts and exemptions to combat the crippling effects of global financial crisis. In 2008, the finance ministry had brought down excise duty from 14% to 10% to fight the impact of the crisis. It was reduced to 8% the next year. The rate was increased to 10% in 2010.

The sectors to have seen negative growth in excise collection in the current fiscal, include automobiles, iron and steel, textiles and consumer goods like refrigerators and air conditioners. The overall excise mop-up also declined in September and November last year.

However, the collection rebounded in December by 9.7% to R12,546 crore. In the first three quarters, the indirect tax collection was up 16% at R2.85 lakh crore and the government now needs R1.15 lakh crore to reach the Budget estimate for indirect taxes for the current fiscal.

Financial Express, New Delhi, 09-02-2012