Meet excise target the novel way

MUMBAI: In a bid to attain the revenue target set by the finance ministry, the excise department is resorting to some strange and interesting measures. Excise officials across the country are asking excise payers to change their ways of calculating and submitting tax. The objective is to maximise excise collection. Corporates are toeing the line as it is difficult to say no to an excise official. The new unofficial system adopted by the excise department is very simple. Every manufacturer maintains a separate account which is known as the personal ledger account (PLA). This account is used to calculate the amount of excise the manufacturer will have to pay less any modvat benefit on raw materials or inputs, says a Daman-based chemical unit owner. If the manufacturer has already paid, say, Rs 15 as excise on the various inputs he has bought, then he will deduct this amount from the total excise he will pay. Thus, if the total excise duty to be paid by him is Rs 40, he will deduct the Rs 15 already paid as modvat credit before paying the excise. Thus, he will pay only Rs 25 as excise. Recently, the excise department told manufacturers to forget the whole PLA and modvat exercise. Instead, they were asked to pay the whole excise duty upfront and treat modvat as a credit for the future. This would help in meeting the aggressive target set by the finance ministry. The flip side of this approach is that while the target may be met for the current fiscal year, the credit on excise duty will get rolled over into the next fiscal year''s numbers. This means that the collection of excise duty could fall dramatically in the coming fiscal year as the credit is adjusted against excise demand. The finance ministry had budgeted for Rs 1,09,199 crore in excise duties in ''04-05, which has been revised downwards by 7.7% to Rs 1,00,720 crore in the revised estimates. However, even the revised figure is still seen as a large target. The target for ''05-06 is Rs 1,21,533 crore. The payment of excise on the whole cost or price, without modvat credit, is putting several small- and medium-sized businesses under pressure. It is forcing them to raise money at high interest rates to pay the excise duty. Small traders say that while large companies might be able to cope, most small businessman do not have large cash reserves. Such demands and prepayment of excise might tip some of them into bankruptcy. Moreover, claiming modvat refunds later could take a lot of time.

Meet excise target the novel way

In a bid to attain the revenue target set by the finance ministry, the excise department is resorting to some strange and interesting measures. Excise officials across the country are asking excise payers to change their ways of calculating and su...

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