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Tax breaks in recession
March, 02nd 2009

The Central Government has announced reductions in Central Excise duties from 16 to 14 % to 10 to 8% in quick succession for most items. This has been done to counter recession to a certain extent and in the face of nearing elections to another extent.

The steps taken are laudable and should help one and all.

The important question is -- When will the state and local governments follow suit? When will they reduce the rates of sales tax, rationalise property tax and reduce or better still abolish Octroi?

As at the present time sales tax and octroi hurt consumers more than the central levies. Consumers have no recourse to set offs. So for almost every commodity that consumers buy -- be it cars, white goods, beverages, packaged eatables, eating in restaurants -- they shell out an enormous 12% plus as sales tax.

In rupee terms this may mean that effective Central excise duty paid on a 100 rupee product would be Rs 5. Whereas sales tax could be Rs 10 (almost double) and octroi another Rs 3 or more - not less.

Does the municipal corporation maintain an army proportional in size to the central government? Or does the municipal government maintain a monetary system at local and international level like the central government, that it is justified in collecting almost the same amount as taxes, as the central government?

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