2% excise duty hike to rake in Rs 40k crore

Be prepared for a price hike of all manufactured goods from cars to refrigerators as the government is weighing the option of hiking excise duty on manufactured goods and services from 12 to 14 per cent.

The move, as part of Budget proposals for 2013-14, is expected to fetch the government additional revenue of Rs 30,000 to Rs 40,000 crore for the fiscal.

The additional revenues could be ploughed in for the raft of welfare schemes that the government would like to unveil before the general elections slated for next year.

If the hike in excise duty and service tax is implemented this year it will be highest ever since excise duty was implemented 19 years ago.

In 2008, the government had pruned the excise duty to 8 per cent to bail out the economy from the worst industrial slow down in 80 years.

 “The government is examining the option of raising the service tax and excise duty on standard non-petroleum goods from 12% to 14%,” a senior official said requesting anonymity.

The tax rationalisation scheme, as contemplated by the government, is likely to be a curtain raiser before the eventual roll-out of nation-wide goods and service tax (GST), which will replace state levies like value added tax (VAT) and octroi by a single tax.

Once GST is implemented, both the Centre and states may levy service tax and excise duty at 8% each. Currently, states cannot tax services.

In the last budget standard excise and service tax was raised by two percentage points  to 12 per cent. Sources also added that government could also increase excise duty on a host of several products from 6 to 8 per cent. If the hike in excise duty and service tax is implemented this year it will be highest ever since excise duty was implemented 19 years ago.