The forthcoming budget is likely to end the excise duty relief available to small scale industries as the government prepares the ground to roll out the goods and services tax (GST).

These industries, however, will have the option of migrating to another scheme with lower tax and minimal compliance burden.

"The Centre is keen to roll out some components of the goods and services tax in the indirect taxes this budget itself and in this light a composition scheme is being examined," said a government official privy to the deliberations. The idea is to expand the tax base without hurting small producers in line with the GST.

Under the proposed composition scheme, asmall scale manufacturer would be required to pay a much lower rate of duty than the prevailing 12% Cenvat rate with a minimal compliance burden. This flat rate could be as low as 1% of the total turnover. However, the manufacturer will have the option to pay full duty and claim credit for tax paid on inputs. The scheme is consistent with the proposed GST.

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