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SED only on 8 items including PFY, motor cars, MUVs, soft drinks

LPG, kerosene, auto CNG and diesel engines up to 10 HP will now attract 16% cenvat

In his earlier Budgets, Union Finance Minister Yashwant Sinha had made efforts to address the issues of cascading, distortions, anomalies and inequities in the commodity tax structure. Claiming that he had achieved significant rationalisation of tax structures relating to both excise and customs duties, Sinha, while presenting the indirect tax proposals in the Union Budget 2002-03 in parliament today said the number of rates are few, and procedures more transparent than before. The service tax, though confined to limited number of services, has gained ground.

In Union Budget 2000-2001,Sinha had introduced the rate of 16% as the rate of Central Value Added Tax (CENVAT) in the excise duty structure. Last year, he reduced the three rates of special excise duty to a single rate of 16%. This rationalisation in the duty structure, he said, had considerably reduced disputes and litigation and the cost of compliance to the assessees. "Above all, it has put in place a system, which is stable, just and rational. We only need to refine it further," he said.

Sinha, consequently, has proposed the abolishing of the 16% special excise duty on a number of items. Henceforth, the special excise duty shall be confined to the following 8 items only:

Polyester filament yarn;motor cars; multi utility vehicles;tyres for replacement; aerated soft drinks and soft drink concentrates; air conditioners;pan masala; and chewing tobacco & miscellaneous tobacco preparations

The finance minister also proposed to do away with the concessional rate of 8% excise duty applicable to LPG, kerosene, auto CNG and diesel engines up to 10 HP, which will now attract the cenvat rate of 16%.

The rates of excise duty have now been considerably moderated. However, several exemptions still continue. In the Union Budget 2001-02, Sinha had imposed excise duty at a moderate rate of 4% on a few items. He now proposed to increase this rate from 4% to the next slab of 8% this year.

Simultaneously, he proposed to impose excise duty at 4% on a few more items, which had remained exempted so far. These include cigars, cheroots and cigarillos of tobacco or tobacco substitutes, which will now attract 16% CENVAT.

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