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Sharp cut likely in excise sops, median rate to stay unchanged
December, 05th 2006

The excise duty regime could be sharply tightened by cleaning up the exemptions slate in the Budget 2007, but there is unlikely to be any change in the median rate of 16%.

The duty has always been the highest contributor to the governments tax kitty, but has yielded place to corporate tax as per the latest tax data. The excise duty has recorded the lowest growth in collections among the five major taxes.

The policy being worked upon by the government is now looking at addressing the main factor responsible for this. The plethora of exemptions on excise front has complicated the structure with multiplicity of rates while acting as a drag on the revenue collections. These exemptions have been prone to rampant misuse.

The area-based exemptions have drawn protests from states which do not have those benefits. The government has also found that these exemptions, instead of serving the objective of industrial development in the given states, were becoming vehicles of rampant misuse. In the backdrop of all these factors, these concessions will also be reviewed.

Though concessions to Uttaranchal and Himachal Pradesh have been extended till 2007-08 this year, the government is now proposing to put in place some curbs. The same may be done for the north-east and Jammu & Kashmir. The government had withdrawn a host of excise and Customs exemptions in the last Budget and this exercise is expected to continue.

A list of existing exemptions on excise and Customs front which can be withdrawn has already been put up for public comments on the departments Website. There are many exemptions that were granted through notifications.

Also, as a policy, the government is willing to do away with end use-based exemptions as they were prone to misuse. Also, there are a couple of exemptions which have outlived their utility or need certification or give rise to disputes. These also may be phased out.

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