Govt may lift duty cuts making goods dearer

Govt has circulated a list of 54 items exempted from excise duty and 21 from customs duty to seek public opinion.

india Updated: Apr 14, 2006 12:10 IST

Tooth powder, lantern, tyre, mosquito net, instrument box for students, pressure cooker, bicycle pump, pen, pencil, sharpner and blade may become expensive as they are among the 54 items on which excise duty exemptions are proposed to be lifted.

Prices of television camera, audio recording equipment, video machine, various types of camera, personal computer, type writer and fax machine that are now allowed to be imported duty free by professional journalists may also go up with the Government proposing to withdraw customs duty exemptions on 21 items.

As part of ongoing indirect tax reforms, government has recently circulated a list of 54 items exempted from excise duty and 21 items exempted from customs duty to seek public opinion on their withdrawal.

The Revenue Department which has circulated the lists has given two months time for response after which it will take a decision on their withdrawal.

As customs and excise duty exemptions are provided through official notifications, their withdrawals need not require Parliamentary approval and could be done through a notification.

Official sources said that the 21 customs duty exemptions would in all probability be withdrawn after getting feedback from the public as they had outlived their utility with peak customs duty coming down substantially to 12.5 per cent in 2006-07 budget.

Aviation gas and aviation turbine fuel were also among the 54 excise duty items on which exemptions were sought to be removed, the sources said, adding this was one area where the Finance Ministry might find it difficult to lift the exemptions because of certain sensitivities.

Along with the Budget presentation this year, Finance Minister P Chidambaram had circulated for the first time, a report which estimates the revenue that Government forgoes every year.

According to that estimate, Rs 1,58,661 crore was lost due to various direct and indirect tax exemptions in 2004-05.

The excise duty exemptions alone cost the exchequer Rs 30,000 crore, while that of customs duty Rs 92,561 crore. These figures included tax sops given to exporters.

However, the note circulated by the Finance Ministry said the exemptions given to small scale industries would remain.

The sources said it had not prepared a list of direct tax exemptions, which it proposed to consider for withdrawal now as it would require Parliamentary approval unlike excise and customs duties which could be withdrawn through official notifications.

The long list of 54 excise duty exempted items include surgical rubber gloves, tyre tubes, chemical reagents, light weight coated paper used for printing of magazines, optical glass, forgings and refined copper, sheets used for manufacture of utensils and handicraft, aluminium plates, recorded video cassettes, toys, brooms, pen and pencils and sports goods.

Among the list of goods for withdrawal of customs duty are items like packaging material, certain types of sports goods, the wireless apparatus, recorded magnetic tapes and floppy diskettes imported by University Grants Commission for use in computers and X-Ray baggage inspection systems.

While the Finance Ministry is keen that it should withdraw exemptions from ATF, airline players were too strong as at present, airlines get reimbursement for the excise duty paid on ATF.

The government is also keen that nothing should be done that will have a cascading effect on prices.

The Kelkar Panel reports on direct and indirect tax reforms had recommended withdrawal of practically all the tax exemptions in a phased manner.

Accordingly as part of the cleaning up operation, Government has been withdrawing a few exemptions every year during the last three years on both direct and indirect taxes.

With moderation of tax rates, most of the exemptions have outlived their utility particularly those that are sector specific.

First Published: Apr 14, 2006 12:03 IST