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Ordinance to hike excise duty?
By Our Special Correspondent
NEW DELHI, JAN. 8. In a bid to halt the accelerating fiscal deficit, mainly because of a substantial revenue shortfall, the Union Cabinet today decided to do away with the inhibiting clause in the Central Excise Tariff Act which prohibits an increase in excise duty by more than twice the existing rate. The emergency provision is to be acquired through the issue of an ordinance, pending the amendment of the Act in the next session of Parliament.
The Cabinet, however, decided to retain the other clause which says that in case of nil duty on any product, the Government can impose a duty up to a maximum of 50 per cent in ad valorem terms, that is, at the price value of the product.
Though nothing has been stated officially, the Government has let the impression grow that these emergency measures are being taken to take care of an increase in expenditure in case of a possible India-Pakistan war. However, economists point out that additional collections through increases in excise duty in a recession-hit economy would not be able to generate adequate resources to finance a war and the usual way is to impose a surcharge on income and corporate tax. While fairly accurate estimates of increased income and corporate tax can be made, a precise estimation of additional excise collections is difficult as that would depend on demand and consumption patterns.
Measures like increases in income tax are, however, being avoided at the moment in view of the elections to the State Assemblies, and instead, the indirect method of raising indirect taxes is being tried. Secondly, the extremely low inflation rate of 2.21 per cent in the last week of December 2001 provides the cushion for a possible price increase without impacting the overall fiscal situation very much.
``No immediate plan''
UNI reports:
The Finance Ministry does not intend to raise the excise duty on commodities ``immediately'' making use of the enhanced powers vested with it by the Union Cabinet today, the Revenue Secretary, S. Narayanan, said.
He also clarified that the Cabinet decision had nothing to do with the developments along the Line of Control with Pakistan.
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