Revenue Scrounges for Collections Lose Buoyancy, Excise at 14% in the Offing

Arun Goyal. Editor

Revenue Secretary Soumen Mitra the IAS officer from MP is a troubled man, he needs revenue to bring down the bloated fiscal deficit. Inspite of the fall in rupee, imports are far in excess of exports. The Government has to cut imports to preserve foreign exchange and raise duties to boost flagging customs collections… only six percent above last year and nowhere near the 27 percent budget rise.

The falling rupee was good for customs revenue as the forex was valued on a higher forex rate. However, the rupee is falling to Rs 53 to the dollar with the stock market stabilising. This means falling revenue, lower exports, higher import and larger current account deficit. Not a good wicket to bat on, Mr Mitra.

The Government has already hiked the tariff on edible oil and gold before the budget to raise revenue and curb imports. We can expect similar action for other bulk import items like fertlisers, crude petroleum and second hand machinery. Valuation systems of recyclable scrap such as steel, paper, rubber, textiles, plastics may be revised to bring in higher taxes.

Excise may the raised on the logic that the rate was 16 percent at one time, the fall in the incidence was only temporary in order to give stimulus to the economy in the later part of the first decade ending in 2010. Now that the world economy is on the upswing, we can return to status quo ante. The CENVAT system will insulate the manufacturer and trader who will pass the tax on to the consumer.

The impact of the new system will be felt on imports specially. CVD plays a key role in the customs duty since it accounts for 12 percent while basic duty it generally 7.5 percent or 10 percent. It is also levied on top of the basic duty in addition to the value of goods. On most electronic goods, the basic duty is exempted on account of the IT Agreement concluded at WTO but the CVD of excise continues at the high 12 percent even though the goods are not manufactured in India and are thus not liable to pay excise.

As the Budget event pans out, we in ABS will report the developments to you through our channels of DAILY INDEX OF CHANGES by Email and our web site worldtradescanner. com. Please do call us or email us your views and comments. Contact 011-23240230, email: academy.delhi@gmail.com.