India Government may not yield to widespread demand to rollback excise and customs duty on petroleum products including 18% Minimum Alternative Tax (MAT) in the Union Budget proposals for 2010-11 as it is not inflationary. The food inflation experienced in the past few months is due to supply side bottlenecks and not due to fuel price movements.
This was indicated by Revenue Secretary, Sunil Mitra an ASSOCHAM organised post budget seminar the other day. Mitra clarified that effective corporate tax is around 22% and Finance Minister rewarded common man and industry with lot of consumption as well as savings power, no roll back could be possible on issues listed above.
Fiscal consolidation and growth would continue to be top priority of the Finance Minister for which revenue generation is one of the objectives of the Finance Ministry and through raise in excise and customs on petroleum products including crude, the government would have to generate Rs.26,000 crore in fiscal 2010-11, pointed out the Revenue Secretary. This will be possible only with no tinkering in excise and customs duties proposal announced for petroleum sector for Budget 2010-11, said Mr. Mitra.
He explained that hike in excise and customs duties would not fuel inflation in the long run and on the contrary the raise in these two duties would be absorbed because food inflation is mainly on account of supply side constraints. Mr. Mitra, however, admitted that inflation could marginally go up in the short term on account of upwardly increase in customs and excise.