Every year suggestions are given by industry, trade and analysts to introduce certain reforms in the Union Budget and just only a few are implemented. For Budget 201, I am here giving some of the suggestions which need to be given utmost attention by the Budget makers. I am also keeping in mind that the structure of excise and service tax should be made more GST-friendly.
(a) The Central excise tariff is supposed to have been simplified. That is the current impression given in the last few budgets. In reality the tariff remains quite complicated, which can be understood only if we go through all the notifications and the alternative rates. Merely making 85 per cent of revenue coming from the rate of duty of 16 per cent does not simplify the tariff. If the general rate is 16 per cent and there are some exemptions in a chapter, there will still be complications in classification because the manufacturers may claim those exemptions and the Revenue Department will like to deny them. It is imperative that the exemptions are substantially reduced and the conditions in the exemptions are also minimised. The same is also true for Customs Tariff.
(b) Central Excise Tariff.
(i) All entries in the Central excise tariff which are for unmanufactured goods must be removed from the Central excise tariff as they are not excisable.
(ii) In the excise tariff only ‘Nil’ should be there. All entries of ‘Blank’ should be abolished. ‘Nil’ and ‘Blank’ should not be written interchangeably. ‘Nil’ is the proper expression which means that the goods are basically excisable and the government at the present moment does not want to charge any duty on it.
(iii) In the customs tariff the expression ‘Free’ should be replaced by ‘Nil’. That will bring symme-try between the expressions in customs and Central excise tariff.
(iv) Thus in place of three expressions, ‘Nil’, ‘Blank’, and ‘Free’ there should be only one expression: ‘Nil’.
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(c) The exemptions based on the use of power or machine should be abolished.
(d) Cenvat — The Cenvat procedure is not just a pro-cedure but is the crux of the operation of input duty cre-dit system. It is highly complicated and can be simpli-fied. The suggestions are the following:
(i) Distinction between capital goods and inputs to be abolished;
(ii) Reference to manufacture has to be reduced in favour of ‘use’.
(iii) It should be laid down that all goods used should be allowed Cenvat Credit excepting those in the negative list. This will ensure that the system is one of comprehensive goods tax with a negative list.
(iv) Interchangeability of input from service tax and central excise should be made complete without any restriction.
(e) The law of unjust enrichment should be scrapped not because it is illegal but it is economically detrimental. Particularly now that central excise and service tax will be a part of GST, the law of unjust enrichment has to be given a go bye since the Central law has to be similar to the State laws. In the states there is no such law of unjust enrichment. On this ground alone the law of unjust enrichment should be scrapped even for customs also since there should not be a difference between customs on the one hand and GST on the other.
(f) Comprehensive service tax should be introduced immediately as a preparation to the Central GST. This mea-ns that all services are to be declared as taxable except those in the negative list. At present we have got more than 110 services which are taxable. But this selective system cannot continue any more when the GST is coming.
It was necessary to have a selective system in the beginning since the service tax was introduced in 1994 Budget only with three services. But now the coverage has bec-ome extremely comprehensive and only a few services are not covered.
(g) The system of Review Committee of Chief Commissioners must be given a decent burial. It has proved a dismal failure and Tribunals have had to adversely comment on its efficacy.
Email: smukher2000@yahoo.com
(The author is a former member CBEC)