Taxation - Excise Duty

Data for service tax collections available only for April shows a whopping 40% increase in collections during the month at Rs 6,093 crore, according to an official release.

Excise duty collections grew by 0.9% to Rs 15,993 crore in the first two months of this fiscal compared to the same period last year, thanks to collections picking up in May. Despite the improvement in performance compared to the previous month, the collection in May fell short of the target of 8.8% growth for the whole fiscal.

For the month of April, collections under excise duty had fallen by 3.9% to Rs 6,410 crore against Rs 6,673 crore in the same month last year. Finance minister P Chidambaram had said that meeting target of excise duty collections for this fiscal appeared to be a formidable task. Customs duty receipts were up by 25.1% for the first two months at Rs 19,223 crore. Collections under this head grew by 25.2% at Rs 10,205 crore in May. Despite cut in Customs duty on various items to tame inflation, the government is hopeful of meeting the Customs collection target for this fiscal. Customs duty and service tax collections are targeted to grow at 14.4% and 26.1% during the current fiscal, respectively.

This year's excise duty collections target is pegged at Rs 1,37,874 crore at a time when the general cenvat duty is reduced from 16% to 14% in the budget.

And Chidambaram has ensured that consumers have much more savings in taxes to be able to afford many luxuries such owning small or hybrid cars by proposing lenient levies on personal income that could help an individual save up to Rs 44,000 per year.

At the same time, the Finance Minister has laid the ground for cheaper fertilisers for farmers by reducing customs duty on crude and unrefined sulphur as also phosphoric acid used for making the agri-nutrients.

Simultaneously, the feed for chicken and other livestock will also be cheaper with the Budget proposing cutting down customs duty on bactofuges and feed additives and pre-mixes.

But, the gesture for health care is the most significant one with the Budget cutting down customs duty on six specified drugs and bulk drugs while slashing by half the excise duty at eight per cent on drug formulations and exempting anti-AIDS drug Atazanavir and bulk drug for its manufacture.

The Finance Minister, in the Budget tabled in the Parliament today, proposed to reduce excise duty on small cars from 16 per cent to 12 per cent. Similarly, he has proposed to remove excise duty completely on electric cars, while the same on hybrid ones would come down to 14 per cent from 24 per cent earlier.

Two-wheelers buyers can also expect reduced prices as the Finance Minister proposed to cut excise duty by four per cent to bring it down to 12 per cent.

In the financial statement, the government also announced to slash customs duty on raw materials for making ELISA kits to five per cent.

With summers approaching, the government has sought to take the heat off packaged tender coconut water by completely exempting excise duty on it. The Budget also proposes to exempt excise duties on milk containing edible nuts, tea, coffee pre-mixes and puffed rice.

The Finance Minister has not been as generous with the smokers, as he has doubled the customs duty on cigarettes, cheroots, cigarillos, to 60 per cent. The Budget also proposes to make cement clinkers, packaged software, naphta costlier.

What will be cheaper
Two wheelers
Pharma goods (excise duty cut to 8%)
Anti-AIDs drug gets excise duty exemption
Phosphoric acid (custom duty reduced to 5%)
Bulk drugs (Duty cut from 10% to 5%)
Custom duty on steel scrapped
Custom duty on vitamin pre-mixes to lower from 30% to 20%
Excise duty reduced from 16 to 8 per cent on water purification items.
Fertilisers

LUB national president Sushil Gupta said the government should further strengthen the SSI sector by raising the excise limit. The excise duty with MODVAT on units with a turnover between Rs 3 crore and Rs 4 crore should be 8%, for Rs 4 crore to Rs 5 crore, the duty should be 12% and for units with more than Rs 5 crore turnover, the government should charge 16%, he said.

Mr Gupta said the exemption limit based on MRP basis in pharmaceutical SSI units should be replaced by cost price as declared by the units from time to time. The micro or SSI units, which were presently not availing MODVAT credit, should be compensated by refunding 50% of excise duty paid on inputs, he said. The SSI units should not be liable for payment of service tax on transportation of goods as inputs or finished goods.

LUB national president Sushil Gupta said the government should further strengthen the SSI sector by raising the excise limit. The excise duty with MODVAT on units with a turnover between Rs 3 crore and Rs 4 crore should be 8%, for Rs 4 crore to Rs 5 crore, the duty should be 12% and for units with more than Rs 5 crore turnover, the government should charge 16%, he said.

In 2005, the Government imposed excise duty on the Maximum Retail Price of manufactured drugs, which when compounded with the excise exemption available in some States including Himachal Pradesh and Uttaranchal left several small and medium manufacturing units outside the tax-exempt States uncompetitive and is now practically edging them out of business.

It has also badly hit the 10 lakh people employed in the sector, complain representatives of small and medium scale pharmaceutical enterprises.

"Companies supplying drugs manufactured in the tax-exempt States stand to gain because their products are preferred by traders and retailers as they get larger margin with the drugs being excise-free," said Jagdeed Singh, Secretary-General of the Confederation of Small and Medium Pharma Enterprises.

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
New Delhi, the 25th January, 2008
5, Magha, 1929 saka
Notification No.7/2008-Central Excise (N.T.)

G.S.R. (E).- In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Central Excise Rules, 2002, namely:-
1. (1) These rules may be called the Central Excise (Second Amendment) Rules, 2008.
    (2) They shall come into force from the date of their publication in the Official Gazette.
2. In the Central Excise Rules, 2002 in rule 11, after sub-rule (2), the following proviso shall be inserted, namely:-
"Provided that in case of a proprietary concern or a business owned by Hindu Undivided Family, the name of the proprietor or Hindu Undivided Family, as the case may be, shall also be mentioned in the invoice."
F.No. 201/14/2007-CX.6
(Rahul Nangare)
Under Secretary to the Government of India

Note: The principal rules were published in the Gazette of India Extraordinary, vide notification No. 4/2002-Central Excise (N.T.), dated the 1st March, 2002, vide G.S.R. 143 (E) dated the 1st March, 2002, and were last amended vide notification No. 3/2008-Central Excise (N.T.), dated the 18th January 2008, vide G.S.R. 40(E) dated the 18th January 2008.

The excise duty on various IT-related items will be levied on the basis of retail sale price with effect from tomorrow, a Central Board of Excise and Customs (CBEC) notification said while announcing the abatement rates for various items.

Currently, the excise duty on various IT related items is levied on the basis of transaction price of items, ranging from 12 to 16 per cent.

The industry, however, could not tell whether the introduction of MRP-based taxation would make computers, modems and set-top boxes cheaper.

The abatement rates for printers, ink cartridges, modems, keyboards, mouse, monitors has been fixed at 25 per cent of retail price, set-top boxes (for gaining access to Internet and for television) at 24 per cent and personal computers at 22.5 per cent.

These rates were decided by the abatement committee, after consultation with various chambers and associations, industry sources said.

Under the new system, the duty on IT products would be levied on retail price after deducting the permissible abatement.

"Anyone who has been slapped with a showcause notice, with a tax liability of Rs 3 lakh or beyond can approach the Settlement Commission, provided the case is not pending in an Appellate Tribunal", said Sunipa Basu, vice president of Settlement Commission(Customs and Central Excise), Kolkata.

However, the concerned individual or company cannot question the legality of the commission's decision.

E-filing of returns have been made mandatory, effective from June 2007 for all those paying excise or customs duties of Rs 50 lakh and beyond, she stated.

The powers of the Settlement Commission(Customs and Central Excise) have been curtailed.

Giving details of this matter, Basu said cases of outright smuggling and evasion have been kept out of the purview of the commission. Basu was speaking on the occasion of a seminar on Central Excise, Customs, Service Tax and VAT: Laws and Procedures, organised by Calcutta Management Association(CMA) under the patronage of Patton International Limited.

In Customs, the deemed value has been replaced by transaction value, which implies that tax will be imposed on the price that one pays for the goods, Basu informed reporters.

Speaking on the occasion, RK Mishra, additional commissioner, central excise, Kolkata referred to the system of Risk Management, introduced last year. This system has allowed a large number of goods to be cleared without scrutiny.

"It is not feasible to do a thorough check on all the goods and so now the focus is on observing the behaviour of the industry", Mishra said.

Mishra also hinted at the Goods and Services Tax, which is likely to be introduced in 2010.

A revised North East Industrial and Investment Promotion Policy, 2007 (NEIIPP, 2007) has come into effect from 01.04.2007 which inter alia, provides for excise duty exemption scheme for industrial units located in the North Eastern Region including Sikkim.

Accordingly, a Notification has been issued today. As per the Notification, the exemption will be available for a period of ten years for new units and existing units undertaking substantial expansion, irrespective of their location in the North East or Sikkim. However, this exemption will not apply to specified goods namely, pan masala, cigarettes and other tobacco products, plastic carry bags of less than 20 microns and petroleum products produced by petroleum oil or gas refineries.

Simultaneously, another notification has also been issued today to carry out certain amendments in the excise duty exemption schemes for the North Eastern region.

As a first step, sources said, the finance ministry has asked field formations to book more cases involving excise duty evasion. A North Block official said, "So far we have expected taxpayers to pay taxes on their own initiative. But now we have realized we must be introduce more stringent norms."

The Central Board of Excise and Customs has already introduced a system where by companies paying excise duty of Rs 50 lakh or more will have to go in for electronic filing, beginning 2007-08.

In January this year, it also introduced a number of deterrent provisions, such as withdrawal of Cenvat credit and monthly payment facility, in order to increase compliance amongst manufacturers.

The ministry is hopeful that all these steps would help increase compliance and in turn increase excise duty collections. However, sources said it will be closely monitoring excise duty collections in the coming fiscal and is collections continue to be low; it will come up with more measures and tighten its excise administration.

So far, the new provisions have helped boost excise duty collections for the fiscal and the CBEC is confident of reaching the revised estimate of Rs 1,17,266 crore for 2006-07, and may even earn a few crores more.

Customs and excise collections increased by 16.8 per cent to Rs 1,79,265 crore till February this fiscal, as against Rs 1,53,463 crore in the same period last fiscal.

"While there has been a substantial increase in the collection of income tax and corporate income tax, there has not been a commensurate increase in the excise duty collections, signifying that there is evasion of excise duty. In 2007-08, there would be a concerted effort to check evasion of excise duty," Chidambaram said launching the electronic accounting system in excise and service tax (EASIEST) here today.

For all assessees paying excise and service tax to the tune of Rs. 50 lakh and above per annum, it would be mandatory to make the payment through e-mode from April 1, 2007, Chidambaram said.

Stating that e-payment was the most convenient method for payment of excise and service tax, Chidambaram said that in course of time everyone would be required to use the e-payment mode.

The Central Board of Excise and Customs in association with Principal Chief Controller of Accounts, RBI and 28 scheduled banks has introduced a simplified electronic accounting system for central excise and service tax payments called EASIEST.

Instead of the factory gate price, the industry was asked to pay excise on the basis of MRP, thereby exerting pressure on trade margins. The MRP-based assessment also led companies to think twice before printing the price tag -- a move which is expected to be consumer-friendly.

The new RSP-based system covers printers, monitors, computer key boards, scanners, mouse, plotter, fax machines, modems and set-top boxes. The distribution channel for these items is different, and that was the reason for introducing an RSP-based framework, say tax experts.

Central excise rate of 16% and service tax rate of 12% are unlikely to be merged into a unified rate of 14% in the near future. The government seems to be holding back the alignment for the impending introduction of a goods and services tax (GST) in 2010.

Instead of amending both rates now, it's a simpler option to let the convergence happen when GST is ushered in. Hopes of GST replacing excise, service tax and state-level VAT by 2010 have been revived with the central government and the states agreeing to work on a roadmap for the composite levy.

Only two years remain before the scheduled deadline for introduction of GST, and the government is likely to wait till then, focusing on CST phaseout in the interim. Besides taxing only the value-added, the GST may be friendlier to India Inc than the current structure of multiple taxes.

While a cut in CENVAT to 14% is acceptable to India Inc for obvious reasons, there is resistance to a hike in the service tax rate to 14%. Fears of higher service tax incidence fuelling inflation could be another factor behind the excise-service tax alignment getting postponed.

There was a lot of speculation before the 2007 Budget that the excise and service tax rates may be aligned.