Duty-free food, non-food items face 8% excise hit

NEW DELHI: It may be time to stock up your larder. For, the government is set to levy an 8% excise duty on a range of both food and non-food products, which are currently levy-free.
However, items of mass consumption such as milk and cream, bread, green tea, spices and coffee are likely to be spared. The duty on over two dozen products, which is currently 4%, may be raised to 8%. But the government is unlikely to touch the rates on nearly half-a-dozen products that attract an 8% levy.
The major change in the forthcoming Budget is likely to give manufacturers the option of availing of set-offs on the duty paid on inputs. Currently, Cenvat credit is unavailable on products attracting either a 4% or 8% duty. The government appears to have broadly concurred with the recommendations of the Kelkar Committee to have a three-tiered duty structure instead of a single Cenvat rate. Duty rates are currently 0-32%. The rationalisation of the duty structure in the Budget will entail knocking off the 4% excise, imposing an 8% levy on tax-free goods, maintaining status quo on the existing 16% Cenvat rate and pruning the 16% special excise duty (SED) on items such as motor cars.
Apart from revenue considerations, the rationale behind imposing an 8% Cenvat on several products, currently exempt from excise, is based on the government’s decision to continue with the existing 16% Cenvat rate as opposed to the 14% recommended by the Kelkar Committee.
The government has estimated excise collections at Rs 91,433 crore in the current fiscal. Products attracting a 16% Cenvat rate account for over 60% of this.
The Kelkar panel had recommended a 6% Cenvat on about 30 food products, including butter, cheese, jam, sauce, vanaspati and other processed foods. There could be some cherry-picking from this list as the Rajanath Singh Committee has opposed bringing items like vanaspati in the excise net.
The Kelkar panel had also recommended a 6% Cenvat on as many as 167 non-food products, which are currently duty-free. This list includes a range of textile products. In fact, a separate package is on the anvil for the textile sector. The panel had also recommended that the duty exemption on 167 products be retained. This list includes food items of mass consumption, life-saving drugs and equipment, security items and agricultural products. The government is likely to accept this list in toto.