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Kelkar panel for 3-slab duty structure

In a far-reaching reform in Indirect Tax, the task force headed by Vijay Kelkar recommended three slabs for Customs and Excise duty structure and halved the turnover to Rs 50 lakh (Rs 5 million) for duty exemption for small-scale industries besides wide-ranging procedural simplification.

Releasing the consultation paper, advisor to the finance minister, Vijay Kelkar, said the proposed reforms would reduce the transaction costs by 50 per cent with a potential gain of Rs 5,000 crore (Rs 50 billion) annually to the economy and arrest the trend of falling Indirect Tax to GDP ratio.

Outlining the roadmap for Customs Duty reforms to be completed by 2004-05, the Task Force suggested zero per cent duty for life-saving drugs, government imports for defence, security and atomic energy and imports for RBI.

It proposed the duty for raw materials, inputs and intermediate goods at 10 per cent while that for finished goods at 20 per cent. A higher duty of 150 per cent has been suggested for specified agricultural goods and demerit goods.

On Excise, the Task Force fixed three rates -- zero per cent for life savings drugs and security items, 8.0 per cent for food products and 16 per cent for all items.

It proposed separate rates for agricultural products and tobacco and its related products.

The special additional duty of 8.0 and 16 per cent, levied over and above the 16 per cent Cenvat rate, should be reduced by 4.0 per cent annually to bring it at the basic rate of 16 per cent.

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