Excise duty: Cess on petrol & cigarettes

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CENVAT'S preference: The Government's intention is to bring as many goods as possible to the Cenvat rate of 16 per cent. Today, 5 items attract 24 per cent.

Out of the 5, I have picked out three polyester filament yarn, tyres and air conditioners and I propose to reduce the excise duty on these goods to 16 per cent.

Manufacturers of motorcars and aerated drinks, the other two items, would have to wait for some more time.

Last year, I took a big step forward to prepare the textile industry to meet the challenges of the post-quota regime. I re-affirm that the Cenvat exemption route for natural fibres will remain in force. I now propose to give independent texturizers the option to avail of the exemption route or pay 8 per cent excise duty with Cenvat credit.

Jewellery: Imitation jewellery now attracts an excise duty of 16 per cent. Since they are products predominantly consumed by the less affluent sections, I propose to reduce the excise duty to 8 per cent. At the same time, expensive and premium jewellery is now manufactured and sold under alluring brand names.

On such branded jewellery, I propose to levy an excise duty of 2 per cent. I may clarify that there is no levy on unbranded jewellery, including unbranded gold jewellery.

Tiles/trailers: In order to remove certain distortions in the tax treatment of comparable products, I propose to levy an excise duty on mosaic tiles at 8 per cent and on road tractors for semi-trailers of engine capacity exceeding 1800 cc at 16 per cent. I may clarify that agricultural tractors will continue to remain exempt.

Tea surcharge: Some sectors deserve relief, since they produce goods for the common citizen. Today, there is a surcharge of Re 1 per kg on tea. I propose to abolish the surcharge. There is also an excise duty of Re 1 per kg on refined edible oils and Rs 1.25 per kg on vanaspati. I propose to abolish both levies and fully exempt the two items.

Light on matches: Even while protecting the handmade sector that makes matches, it is necessary to give some relief to the mechanized and semi-mechanized sectors. Hence, I propose to reduce the excise duty from 16 per cent to 12 per cent on matches made by these two sectors. Hand-made matches are fully exempt from excise duty and, therefore, will continue to enjoy adequate protection.

SSI-ceiling raised: I would like to provide some tax relief to the small-scale industry (SSI). Hence, I propose to raise the ceiling for SSI exemption based on turnover from the level of Rs 3 crore per year to Rs 4 crore per year.

Further, SSI units will now have only two options: either full exemption on the first clearance of Rs 1 crore or normal duty on the first clearance of Rs 1 crore with Cenvat credit.

Steel: I propose to restore the excise duty rate on iron and steel to the normal level of 16 per cent. This should have little effect on prices because the entire duty is modvatable by most categories of consumers.

Molasses: I propose to increase the specific duty on molasses from Rs 500 per m.t. to Rs 1,000 per m.t. to adjust partially for a hefty increase in molasses prices.

Cement: I also propose to increase the specific duty on cement clinkers from Rs 250 per m.t. to Rs 350 per m.t. as an anti-avoidance measure.

Cess for highways: The National Highways Development Project requires very large resources. In order to raise additional resources, I propose to increase the cess on petrol and diesel by 50 paise per litre. The additional resources will be earmarked exclusively for the national highways, and a suitable amendment is being proposed to the Central Road Fund Act, 2000.

Cess for health: The levy of an education cess has been widely applauded. The health sector demands similar treatment. What better way is there to fund health care than tax those goods, which are health hazards? I, therefore, propose to raise some additional resources and allocate the proceeds to finance the National Rural Health Mission. Accordingly, I propose to increase the specific rate on cigarettes by about 10 per cent and impose a surcharge of 10 per cent on ad valorem duties on other tobacco products including gutka, chewing tobacco, snuff and pan masala. However, biris will not be subject to this levy.

(This article was published in the Business Line print edition dated March 1, 2005)
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