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Monday, Dec 09, 2002

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Kelkar panel likely to lower excise for food products

Shaji Vikraman
Hema Ramakrishnan


THE Kelkar panel on indirect taxes has decided to review its original recommendation of levying 8 per cent excise duty on all food products currently enjoying duty exemption.

The panel was now looking at the option of proposing a lower excise duty rate of 6 per cent on these items which include a host of dairy products, edible oils, spices, coffee, infant foods, processed foods and vegetables and meat preparations, said official sources.

The decision to review the recommendation made in the consultation paper - of levying a four per cent excise (without Modvat credit set-off) or eight per cent (with credit set-off) on all food products from 2003-04 and raising it to a uniform eight per cent level without any set-off from 2004-05 - comes in the wake of representations made by the food processing industry.

Industry representatives have reportedly contended that the proposed excise burden on top of state-level levies - such as turnover and entry tax - would adversely impact the development of the organised food industry.

More importantly, it would push up the retail prices of food products including butter, cheese, infant food preparations, namkeens, bhujias, mixtures, fruit juice-based drinks and sweetmeats, sauces, ketchups, seasonings, jams, jellies and other preparations of fruits, vegetables and nuts.

"The panel is now working out the revenue implications of a 6 per cent excise duty rate on food products instead of an 8 per cent duty rate'', said a member.

Yet another view is to continue with the duty waiver on these products, given that any move to do away with the exemption is bound to have political ramifications.

According to official sources, the Kelkar panel has also been flooded with representations from other sectors also seeking reduction in the excise duty rate to 8 per cent. This problem is likely to be compounded if the panel decides to recommend a lower excise duty rate of 6 per cent on food products.

In its consultation paper, the panel recommended excise duty rates of nil for life savings drugs and security related items, 8 per cent for food products and 16 per cent for all items.

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