Govt leans on oil sector for excise duty

The government is today dependent on the petroleum sector to provide just less than half its excise duty compared to the position a decade ago, when it was less than a quarter of the total receipts.

This means that a decade of industrial growth has had almost no impact on the government's exchequer. Besides it has become even more difficult for the revenue department to reduce the tax rates on petroleum and other lubricants (POL) in the budget for 2004-05.

As per the finance ministry's data, out of a total excise receipts of about Rs 91,000 crore in 2003-04, more than 43 per cent has been contributed by the petroleum and other lubricants (POL) sector. This includes basic excise duty, cess and other levies on these commodities. The share of non-POL sector in total excise was Rs 51,750 crore.

Compare this with the position on the excise front in 1994-95, when the share of non POL sector was about Rs 28,000 crore out of the gross excise duty of Rs 36,900 crore.

The trends indicate that the finance ministry may have to also jettison any further fiscal giveaways in the indirect tax sector in the next budget. Excise duty forms the largest tax component for the central government. The others are customs duty, service tax, income and corporate tax.

According to government officials, the lower buoyancy of non-POL revenue can be explained by the slashing of exise duty over the decade, from an average of 29 per cent to 16 per cent, at present.