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Kelkar report: special duty may go earlier

BS Economy Bureau in New Delhi

Vijay Kelkar, adviser to the finance and company affairs minister said on Thursday that the task force headed by him could consider moving faster on the phasing out of the 16 per cent special excise duty or even doing away with it at one go.

The consultation paper on indirect taxes had recommended a gradual elimination of the duty by effecting a 4 per cent cut every year.

Kelkar was responding to a query by Maruti Udyog Ltd managing director Jagdish Khattar who pointed out that the automobile sector would hardly gain by a gradual elimination of the special excise duty.

He said, car manufacturers were already offering discounts of 10 per cent to beat the sluggish demand.

There were similar demands from manufacturers of air-conditioners, which also attracts a 16 per cent special excise duty.

Kelkar, who took questions from corporate chieftains in an interactive session organised by the Confederation of Indian Industry, said the phased removal of the special excise duty had been recommended keeping in mind the revenue implications of such a move.

"A move faster than the proposed 4 per cent a year cut can always be considered," he said. Kelkar, however, ruled out picking individual products and putting them on a fast track.

At present, eight products, namely, motor cars, multi-utility vehicles, tyres for replacement, polyester filament yarn, aerated soft drinks and soft drink concentrates, air-conditioners, pan masala and chewing tobacco, and miscellaneous tobacco preparations, attract the 16 per cent special excise duty.

According to revenue department officials, the total revenue foregone could be as much as Rs 8,000 crore (Rs 80 billion) a year if the duty is eliminated at one go.

Objecting to resistance from a section of industry on the task force's proposals, Kelkar said, a corporation was only a vehicle to carry on business. "Unfortunately in this country, it becomes a fief," he said.

The task force has focussed on the shareholders, who provide the risk capital to companies.

The abolition of dividend tax and long-term capital gains tax, as recommended by the task force, was targeted at the shareholders and not corporations, Kelkar said.

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