India Inc to pay Rs 21,000 cr more if excise goes up 2%

Corporate India will have to shell out an additional Rs 21,000 crore if the 2010-11 Budget increases the excise duty by 2 per cent. A study by the Business Standard Research Bureau shows that 1,278 manufacturing companies (excluding oil and gas) accounted for 8.13 per cent, or Rs 86,314 crore of the gross revenue for the year 2008-09. So, a 2 per cent increase in the excise duty on gross sales of Rs 10,64,865 crore will fetch Rs 21,200 crore more revenue for the government.

Data collected from the annual reports of listed companies show that excise duty was 8-10 per cent of gross sales of automobiles, auto ancillaries, agro chemicals, chemicals, steel, non-ferrous metals and tyres. For consumer durables, fertilisers, paper, pharmaceuticals and textiles, the duty is around 5 per cent of gross sales. It was over 10 per cent for cement and paint companies, while for beverages and tobacco sectors, it was over 38 per cent.

The corporate sector got a major relief in the Budget for 2009-10 when the government announced a stimulus package which reduced the excise duty. The package saw its share in gross revenue declining to an estimated 16.6 per cent of the total for the financial year ending March 2010. That’s substantially lower from the decade-ago levels of over 36 per cent.

At the peak level till 2003-04, central excise duty accounted for over 36 per cent of the gross revenue receipt of central government, which had declined steadily to around 21 per cent by 2007-08 and 17.26 per cent for 2008-09.