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No change in excise tax?
July, 10th 2009

Only three days after the presentation of the Budget, the rain gods are weighing heavily on the minds of the finance ministry.

With the spectre of scanty monsoons haunting large parts of Northern India, the government has put on hold, the review of excise and service tax rates.

It was a decision many were watching closely. No rollback on excise and service tax rate cuts in this year's Budget and that could be the way Pranab Mukherjee keeps it all year.

Finance ministry officials told NDTV that the worries of a poor monsoon are likely to spook all plans to hike excise and service tax rates later in the year.

There were indications that both taxes would be reviewed sometime in September-October.

In fact, to bridge the indirect tax revenue shortfall, the finance ministry was initially keen to hike the Central Excise rate from 8 to10 per cent.

The government's view is based on the premise that a poor monsoon is expected to hit the demand for goods hard, especially in rural India and under these circumstances, a mid fiscal correction in indirect tax rates could be counterproductive.

''Needless to say, the monsoon factor could also depress revenue collections again. The finance ministry is already estimating an indirect tax shortfall of around Rs 14,000 crore this fiscal, both, due to the possibility of depressed sales and also the need to keep the central excise and service tax rates unchanged.''

Meanwhile, April-May indirect tax collections are already a negative, that is, 28 per cent.

This could be just an indicator of things to come as a scorching summer rolls on.

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