Govt still evaluating excise duty cut extension

The government will need to issue a fresh notification if it decides to withdraw the 4 percentage point cut in the excise duty beyond March 31, 2009. However, no such notification would be required if reduction was continued as the earlier one did not specify a particular cut-off date, said a government official.

However, a final decision on whether to extend the rate cut would be taken by March-end, by which time a model code of conduct for general elections was likely to be in place, depending on the impact the duty cut had on the economy, said a finance ministry official.

In the first fiscal stimulus announced on December 7 last year, the government had cut the duty across the board to bail out industry, which had been facing slowdown due to a sharp decline in exports, and to help bring down prices to create domestic demand.

Finance ministry officials feel that the excise duty cut has not percolated to stimulate demand in the economy so far and the incentive needs to continue in the next fiscal as well.

It is likely to be extended till the next government takes charge in June or July. However, a final decision in this regard will be taken by March 31.

The government is not very happy that all the firms are not passing on the benefit of the duty cut to consumers and may take up the issue with them before extending it further, the officials have said.

The global economic slowdown has deepened since September last year and India expects an economic growth of around 7 per cent (earlier estimate was around 8.5 per cent) in the current fiscal.