Luxury goods duty may not be cut

Excise receipts from items such as cars and ACs dropped 18% in 2003-04

With excise duty receipts from luxury items, including cars, air-conditioners and pan masala, falling 18 per cent, or by over Rs 1,000 crore, during 2003-04, Finance Minister P Chidambaram may find it tough to consider further cuts in excise duty on these items in the Budget.

While former Finance Minister Jaswant Singh had halved the special excise duty from 16 per cent to 8 per cent on six items "" aerated water, tyres and tubes, air conditioners, polyester filament yarn, cars and pan masala "" in the 2003-04 Budget, the excise realisation from these products, barring pan masala, was over 10 per cent.

The disaggregated duty collection figures from the six items, on which the Central Board of Excise and Customs levies an 8 per cent Special Excise Duty above the 16 per cent Cenvat, show a revenue loss of Rs 1,115 crore for 2003-04, against that in 2002-03.

For all the six high-value items, barring pan masala, the drop in revenue is disproportionately larger than the cut in excise rates.

For instance, on motor cars, the revenue dropped nearly 15 per cent, while that on air-conditioners dipped 12.33 per cent within a year.

The contribution of these commodities to the net excise revenue receipts of the Centre slipped from 7.4 per cent to 5.6 per cent in the span of a year.

Officials said they had anticipated a fall in revenue collections because of the cut, but the extent of the revenue loss was not anticipated.

They, however, acknowledged that the over 35 per cent fall in the receipts from aerated water (cold drinks and mineral water) was partially because of the controversy over the quality of water used in such drinks.

Chidambaram will, therefore, have to make some strong assumptions on the growth of revenue from excise duty in the current fiscal to offer further sops.

Industry has asked for an at least 4 per cent reduction in the Special Excise Duty rates.

The excise duty receipts for 2003-04 fell short of the revised estimates for the fiscal by Rs 3,770 crore.

The interim Budget for 2004-05 had projected a 15 per cent growth for this tax at Rs 1,07,199 crore, provided the Cenvat and special excise duty rates did not change.

Singh had already loaded the sector with Rs 10,000 crore of revenue loss in the interim Budget because of the various sops he offered on items ranging from iron and steel to thermos flask.