A proposal to fully phase out the special excise duty by 4 per cent every year is under consideration of the government.
According to finance ministry sources, several important sectors like automobiles and aerated soft drinks attract 16 per cent special excise duty over and above the Cenvat rate of 16 per cent.
This pushes the effective excise duty rate on these commodities to 32 per cent.
Sources said the task force on indirect taxes headed by advisor to the finance minister Vijay Kelkar has discussed the proposal.
The SED phase out over the next four years is likely to be part of the recommendations of the task force, they said. The task force is on the verge of completion of its report.
At present, SED is confined to only eight items viz., motor cars, multi-utility vehicles, tyres for replacement, polyester filament yarn, aerated soft drinks and soft drink concentrates, air conditioners, pan masala and chewing tobacco and miscellaneous tobacco preparations. It accounts for a good chunk of the excise receipts.
Sources said the 16 per cent SED may be reduced to 12 per cent in 2003-04 and by 4 per cent each in the next three years.
By doing this, the government will be able to avoid a sudden fall in excise duty receipts and simultaneoulsy phase out SED over a period of time.
For 2002-03, the receipts from basic and special excise duties has been estimated at Rs 67,121 crore, 11.7 per cent higher than the previous financial year.
Finance ministry sources said the government is also likely to take a stern view on exemptions.
While last year, the ministry had imposed 4 per cent excise duty on some items which were exempt earlier, it had simultaneously increased the rate on some other items from 4 per cent to 8 per cent.
Senior North Block officials said the reports of the Kelkar task force on direct and indirect taxes would be taken as inputs while formulating the budget for the next financial year.
The reports are likely to hosted on the finance ministry website by the end of this month.
