Single-Rate Excise Duty Sought
The National Institute of Public Finance and Policy (NIPFP) yesterday said the 2000-2001 budget should introduce a single-rate of excise duty to ensure further rationalisation of the indirect tax structure.
"This is the right time for moving ahead with further rate simplification, cleaning up of the system, and demonstrating to the states that as far as reform of domestic trade taxes is concerned, the Centre is ready to take the lead," NIPFP director A Lahiri said at a round table on excise duty organised by Confederation of Indian Industry.
Pointing out that excise revenue collections had done well, the chief of the autonomous body under the finance ministry said the risks on the revenue front would be limited if the single rate was carefully chosen.
"The single rate needs careful calibration to make it revenue-neutral. The revenue-neutral rate will depend on how far exemptions are removed and the base is broadened," he said.
He pointed out that over 200 items were exempted from excise duties.
"The ministry should remove all exemptions except some 15 to 20 items such as life-saving drugs, oral dehydration salts, newsprint, writing and printing paper for educational text books, stationery items like envelopes, braille paper and weapons used by defence and law and order personnel," Lahiri said.
Lahiri also said the government should ensure that the single rate central value added tax (VAT) together with the state level VAT did not add up to an excessively high figure, given the concurrent jurisdiction of the Centre and states on commodity taxation.
Adding that the economy was ready for a single rate of Modvat, he said the single rate Modvat could be supplemented by selective excise duties on non-essential commodities or commodities injurious to health like cigarettes, as the tax reforms committee had recommended.
However, the government would have to remove most exemptions on Modvat credit and fix the rate at a moderate level, he said.
S Mukhopadhyay, former member of Central Board of Excise and Customs advocated two rates of excise duty, either 16 and 24 per cent or 15 and 25 per cent depending on which is revenue neutral.