In a bid to return to the path of fiscal consolidation, the Union Budget has proposed to increase the standard rate of central excise duty from 10 per cent to 12 per cent, concessional rate from 5 per cent to 6 per cent and lower rate from 1 per cent to 2 per cent. It also proposed to increase duty on specific items such as large cars, cigarettes, jewellery and enhanced cess on crude pertroleum oil.
The government’s proposals on excise duty are expected to result in a revenue gain of Rs 16,910 crore, while the total revenue gain from indirect tax collections, also comprising service tax (Rs 18,660 crore), customs (Rs 2,770 crore) and cess on crude oil (Rs 7,600 crore) will be Rs 45,940 crore.
“Given the imperative for fiscal correction, I propose to now raise the standard rate… The lower merit rate for coal, fertilisers, mobile phones and precious metal jewellery has been retained at 1 per cent,” Finance Minister Pranab Mukherjee said.
In keeping with the increase in the standard rate, the finance minister also proposed to enhance duty on large cars from 22 to 24 per cent. In the case of cars that attract a mixed rate of duty of 22 per cent plus Rs 15,000 per vehicle, he proposed to switch to an ad valorem rate of 27 per cent.
In order to harmonise central excise and service tax, the finance ministry made some alignments, including a common simplified registration form and a common return, comprising only one page that will be a significant reduction from the 15 pages of the two returns at present. The finance minister also proposed to set up a study team to examine the possibility of a common tax code for service tax and central excise.
Following the global financial crisis in 2008-09, the standard rate of excise duty for non-petroleum goods was reduced from 14 per cent to 8 per cent in phases. This rate was raised from 8 per cent to 10 per cent in Budget 2010-11.
