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Leather sandals to cigarettes: What's cheaper, what's expensive

business Updated: Mar 01, 2015 01:33 IST
Union Budget 2015-16

If you are a smoker, get ready to kick the butt. And shell out more to indulge in other expensive habits like eating out at restaurants and visiting beauty parlours.

Continuing the trend set by many of his predecessors, finance minister Arun Jaitley on Saturday came down heavily on smokers and tobacco consumers with a steep increase in excise rate in tax proposals in his budget for 2015-16.

The one tobacco product that did not draw finance Jaitley’s ire was beedi, largely consumed by lower income groups in society.

Citing the need for promotion of public health, Jaitley said: “Excise duty on cigarettes is being increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths. Similar increases are proposed on cigars, cheroots and cigarillos.”

He made changes to the compounded levy scheme applicable to pan masala, gutkha and certain other tobacco products.

As per the budget proposals, excise duty on cut tobacco is being increased to Rs 70 per kg from Rs 60 per kg earlier.

The announcement saw stocks of all major tobacco firms collapse at the Bombay Stock Exchange.

Industry leader ITC tanked 11.12% to Rs 350, the biggest loser among the 30 blue-chips which constitute the market benchmark Sensex. Shares of Godfrey Phillips India tumbled 5.44%, VST Industries by 3.98% and Golden Tobacco was down 2%.

In other decisions, Jaitley increased service tax rate that would make costlier a whole lot of things including air travel, eating out and paying bills.

Those which will turn cheaper include leather footwear, locally made mobiles, computer tablets, microwave ovens, peanut butter, packaged fruits, ambulance service and agarbattis.

“To facilitate a smooth transition to levy of tax on services by both the Centre and the states, it is proposed to increase the present rate of service tax plus education cesses from 12.36% to a consolidated rate of 14%,” Jaitley said.

Subsequently, eating out at restaurants, stay in hotels, air travel, cable and DTH services, visiting beauty parlours, courier service, credit and debit card related services, dry cleaning of clothes, stock broking, asset management and insurance and a host of other activities that require availing of service from another party will become expensive.

Jaitley, however, spared the common man from price hikes on many commonly used day-to-day items by reducing duties.

Leather footwear priced above Rs 1,000 per pair will cost less as excise duty has gone down to 6% from 12% earlier.

Packaged fruits and vegetables will also become cheaper as pre-cooling, ripening, retail packing and labelling of these items have been exempted from service tax.

Similarly excise duty on locally made mobile phones, LED/LCD panels, LED lights and LED lamps have been cut.

Microwave ovens are likely to become cheaper as a key component, magnetron, has been exempted from basic customs duty as compared to 5 per cent earlier. Refrigerator prices could also come down as import duty on various components has been reduced.

Similarly, solar water heater will be less expensive with excise duty on the item changed.

Agarbattis prices will come down as it will now attract nil excise duty with Jaitley announcing “full exemption from excise duty is being extended to captively consumed intermediate compound coming into existence during the manufacture of agarbattis”.

Prices of pacemakers are expected to come down as specific materials used in its manufacturing have been exempted from duties.

Ambulance and ambulance services are also expected to come down as excise duty on chassis of such vehicle has been cut to 12.5% from 24%, while all ambulance services provided to patients are being exempted from service tax.

A visit to the museum, zoo, national park, wildlife sanctuary and tiger reserves will also become pocket friendly with the finance minister exempting such activities from service tax.