Low
excise duty collections have become a cause for concern
for the government. There is massive tax evasion and the
government feels that a tax cut would further lower
revenue from excise duty.
The
government does not want to tinker with excise duty
until a final consensus on the rate and structure of GST
is finalised. “As per our understanding, under the
proposed GST regime, the goods tax is expected to be
about 20% or higher. So we do not see any reason to
first reduce the excise duty rate and then increase
it,” a government official told FE.
Sources
also added that there could be further convergence of
the different slabs of excise duty to the 16% rate.
Experts
feel the move is in sync with the government’s tax
agenda. “The focus of this Budget should be to
rationalise the various slabs of excise duty and have a
uniform rate for all products. The government should
also look at removing other levies such as the National
Calamity Contingent Duty as part of rationalising the
slabs under excise duty,” Pratik Jain director KPMG
said.
However,
this may not spell good news for India Inc which feels
that lowering excise duty to about 14% would boost
sluggish domestic consumption. The Prime Minister’s
Economic Advisory Council in a pre Budget meeting with
finance minister P Chidambaram recommended moderation in
indirect taxes on consumer goods in order to boost
domestic consumption and maintain the growth rate.
Latest
government figures reveal that manufacturing growth till
November 2007 fell to 5.4% from 17.2% a year ago.
Meanwhile the growth in consumer durables fell an annual
4.1% in November 2007, compared with a 10.1% growth in
November 2006.
