Budget 2013 wrap: Excise duty on diesel cars may go up

The finance ministry, in its scramble for funds to bridge the wide fiscal deficit, is considering various proposals to increase revenue, especially from taxes. There have been talk of introducing new taxes, like inheritance tax, and also increasing the existing ones.

Here's another list of pre-budget proposals that have been doing the rounds in the past two days:

Government may hike excise duty on diesel vehicles

The finance ministry is examining proposals to increase excise duty on diesel cars but the hike  may be differentiated in terms of passenger and commercial vehicles, and small, medium and heavy vehicles, says this ET Now report.

The finance ministry is examining proposals to increase excise duty on diesel cars but the hike  may be differentiated in terms of passenger and commercial vehicles, and small, medium and heavy vehicles

The Vijay Kelkar Committee had recommended an immediate increase in prices of diesel by Rs 4 per litre, kerosene by Rs 2 a litre and LPG by Rs 50 per cylinder. Thereafter, it suggested raising rates on a monthly basis until the revenue losses are wiped off.

The suggestion is reported to have been made in the pre-budget consultations between the Finance Minister P Chidambaram and oil minister Veerappa Moily, when the latter indicated that a staggered increase in diesel prices is not sufficient to address the rising under-recoveries of the government.

The Kirit Parikh too  last year went after diesel cars and SUVs with a vengeance by suggesting an annual additional levy on them of Rs 50,000 in the form of road tax.

The Society of Indian Automobile Manufacturers (SIAM) on the other hand has often termed taxation on diesel vehicles as retrograde and has instead asked to raise diesel prices instead.

Even Firstpsot had argued earlier that taxing diesel cars is the worst remedy since high subsidies on diesel is what is actually busting the budget and it would be  a fallacy to assume that by hiking diesel car prices through the levy of higher duties, the subsidy on diesel can be reduced significantly. "The remedy for a wrong-headed fuel pricing policy is not a flawed automobile pricing policy," Firstpost's R Jagannathan argues. ( Read more here)

FM may raise import duty on gold to 6 percent

In an effort to make gold more expensive to discourage people from buying the  precious metal, finance minister P Chidambaram is likely to raise the import duty on gold by 2 percentage points to 6 percent as part of his Budget announcement next month despite concerns of the hike leading to more smuggling, according to this Business Standard report. However, as Firstpost has argued earlier, constricting gold imports is the surest way to make people cling more to the metal. ( Read more here)

Government may do away with inverted duty structure

The government is considering doing away with inverted duty structure, under which finished goods are taxed at lower rates than raw material, for certain items in chemicals-related sectors, with a view to boosting manufacturing.

The Commerce and Industry Ministry in its pre-budget recommendations has asked the Finance Ministry to remove this tax anomaly as it is impacting domestic manufacturers adversely.

Inverted duty structure impacts the domestic industry adversely as a manufacturer has to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and costs low.

Companies manufacturing tyres, electrical equipment and medical instruments are suffering the most due to this. Citing the example of tyre industry, Ficci has said that inverted duty structure in this sector exists with respect to natural rubber which is the principal raw material for tyre manufacturing. Basic customs duty on tyres is 10 percent compared with 20 percent or Rs 20/kg (which ever is lower) on natural rubber.

Defence Budget likely to see a cut of Rs 76,00-9,600 crore

With several ministries being asked to cut back their budgets by as much  as 10 percent, the defence ministry is a little better off as the finance minister has only proposed a budget cut of around 5 percent for the sector.

According to this Business Standard report, defence forces had been asked to postpone the creation of the Strike Corps and payments for the French Rafale fighter to next year.

Firstpost had earlier said that other ministries  like   space, atomic energy, information and broadcasting, communications and IT, home affairs, rural development, panchayati raj and power can see their allocations trimmed by as much as 20 percent.

With inputs from PTI


Updated Date: Jan 16, 2013 15:28 PM

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