FinMin likely to extend auto excise cuts beyond June
May, 07th 2014
The Finance Ministry is working on indirect tax proposals which could give relief to the domestic industry as well support India’s exports. In its to-do list for the new government, the indirect tax team in North Block is examining the extension of excise cuts for the auto industry beyond June, lowering export duties on some items addressing the inverted duty structure in specific sectors.
These are tough times for India’s manufacturing sector. Be it auto, cement or even core industries like coal and power and the finance ministry is only too aware of the industrial slump. After cutting the headline excise rate for the capital goods sector in the interim budget, the indirect tax team in the ministry is preparing a plan to give a further boost to industry.
CNBC-TV18 has learnt pushing India’s exports, supporting the manufacturing sector, keeping a tab on the current account deficit (CAD) and rectifying the inverted duty structure are high on the agenda of the indirect tax team.
This means a small cut in some of export duties is not ruled out. These items like iron ore, iron ore pellets, leather items, bauxite may see a cut in the export duty.
Excise sops given to the auto industry may stand extended beyond June 30 and inverted duty structure for many products is likely to be corrected. The big caveat is that these plans have not factored in failure of the monsoon.
The government is also keeping a check on the CAD, so despite the FM estimating CAD at a low of USD 32 billion for FY14, any rollback in the import duty on gold roll will be calibrated and cautious.
While an overall cut in the headline excise and service tax rates is not being contemplated currently, things could change, if the monsoon fails. The need for a sector focused indirect tax push, may turn into a bigger fiscal relief story, with the new government having to figure out the consequent fiscal maths.