Cars, ACs may benefit from special duty cut

NEW DELHI: The government will review the Special Excise Duty (SED) rate in the coming Budget.

This could benefit industries like cars, tyres and air conditioners, where the total excise burden is now 24% — including the 8% SED. The proposed move is aimed at simplifying the overall excise duty structure by having fewer slabs, said officials.

Auto makers have made out a case to lower excise duties on cars from 24% — which includes a 16% Cenvat, plus an 8% SED — to 16%. This will mean an abolition of SED.

Government officials said that SED rationalisation may cover select products out of the list of half a dozen products that attract SED. The list also includes polyster filament yarn, soft drinks and pan masala.

Finance minister P Chidambaram refrained from tinkering with the SED rates in the ’04-05 budget. The revenue department is understood to be assessing the implications of any cut in the SED on excise collections. A final view is yet to be taken.

Excise revenues from passenger vehicles rose to Rs 1,264 crore up to October ’04, compared to Rs 997.8 crore in the corresponding period in ’03. The jump in collections came on the back of an over 24% growth in car sales. Auto makers have been routing for a 8% drop in excise duties so that the tag price reduction is marked enough to boost demand.

Revenue collections from tyres too nearly doubled to Rs 606.3 crore up to the end of October ’04, compared to Rs 351.2 crore in the corresponding period in ’03, backed by healthy demand.