FM may raise I-T exemption limit to Rs 60,000, slash excise

NEW DELHI: The budget is likely to bring some cheer to manufacturers and consumers. According to sources, the Union Budget ''03 is expected to stimulate demand in the economy by reducing excise duty on certain goods and by restructuring personal taxation.
The government is likely to reduce special excise duty of 16% to 8% on eight product categories, including aerated water, spirits, textured yarn, air-conditioners and motor vehicles. The finance minister is also expected to reduce excise duty of 16% on a host of price-elastic products, such as tyres, paper, soaps and toiletries, sources added.
To increase the disposable income in the hands of the consumers, restructuring on the personal taxation front is anticipated. According to sources, the government is likely to increase the basic exemption limit from the current Rs 50,000 to Rs 60,000, which in turn would lead to a change in the existing tax slabs. The government is also expected to continue with the current tax-saving incentives of 80L, 88, 80CC and 80CCB.
It may be noted that the Kelkar Committee had advocated raising the basic exemption limit from the current Rs 50,000 to Rs 100,000, but had also recommended withdrawal of tax-saving incentives.
“Even though the Kelkar Committee recommended scrapping of tax-saving incentives, the government is likely to retain them,� said a source.
The need to reduce SED and excise duty is all the more relevant now, with the states moving towards a value added taxation (VAT) regime, sources say. “With VAT and a revenue-neutral rate of 12.5%, the burden on manufacturers is likely to increase.
“Hence, to offset this burden, government is likely to reduce SED and excise duty.�
Industry chambers, like Ficci, had urged the government to completely do away with SED of 16% on the eight product categories. The chamber felt there was a need to reduce the overall incidence of excise duty on manufacturers as currently it is quiet high, at 35%. In comparison, the total incidence of excise duty on manufacturers in the UK is 17.5%. Further, a Ficci study shows that the average total incidence on consumer goods, capital goods, basic goods and intermediate goods ranges between 30% and 44%.