Indian Fiscal Budget 1997-98: Full Text

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Central Excise

  1. I now come to my proposals on central excise.

  2. Our excise structure is far too complex. Till some time ago, we had a multiplicity of rates, innumerable end-use exemptions and other distortions. Considerable simplification has taken place. Last July, I promised that within three years we shall have a four rate tax structure. I find that, in the first instance, it is necessary to reduce the dispersion in excise rates. I believe that we can eventually gravitate towards a mean rate around 18%. With this objective in view, I have introduced three new rates, namely, 8%, 13% and 18%. In the process I have done away with the rates of 20% and 10% (except in the case of some petroleum products). In the interest of revenue, I have perforce to continue, for the time being, the rate of 15% which will apply to metals and a few other commodities.

  3. However, the excise duty structure is still punctuated with many exemptions. All commodities, with some unavoidable exceptions, should be subject to excise duty at a minimum rate. I propose to undertake this exercise in the next year's budget.

  4. Cotton yarn will continue to bear an excise duty of 5% only.

  5. I propose to withdraw the exemption in a few cases like jams, jellies, sauces and soups where I propose to impose a nominal duty of 8%. Similarly, I propose to levy a duty of 8% on pens and ball point pens exceeding a value of Rs.100 per piece and on non-power sun glasses. However, writing ink will be free from excise duty.

  6. On a number of items of mass consumption like biscuits, sugar confectionery, laundry soap, tooth paste, tooth powder, kitchen and tableware of glass, and clocks and watches of a value upto Rs.600 per piece, I propose to reduce the excise duty from 10% to 8%. A rate of 13% would be applied for watches and clocks above Rs.600 per piece and other items like machinery and parts, tyres and tubes of two-wheeled motor vehicles, fluorescent tubes, and computers and parts thereof. A reduced rate of 13% will also apply to X-ray films, sanitary towels, napkins for babies and similar sanitary articles.

  7. In respect of a large number of products, I propose to reduce the excise duty by percentages ranging from 2% to 7% and apply the mean rate. Accordingly, the mean rate of 18% would be applicable to many commodities including cocoa and cocoa preparations, instant coffee, sherbats, organic and inorganic chemicals, paints and dyes, electric wires and cables, toilet soaps, detergents, articles of leather, synthetic rubber, fibres and blended synthetic yarn, paper and paper board, plywood,travel goods and a host of consumer durables.

  8. Agricultural and horticultural machinery are fully exempt from excise duty. I propose to extend the exemption from excise duty to milking machines, dairy machinery and their parts.

  9. In order to revive and give a thrust to the ailing jute industry, I propose to fully exempt all jute and jute products from excise duty.

  10. At present, import of equipment and consumables by recognized research institutions is exempt from customs duty. In the interest of the domestic producer, I propose to allow the purchase of indigenous equipment and consumables by such institutions free of excise duty.

  11. I also propose to reduce the duties of excise on certain items in order to bring about a more balanced excise structure on the whole. The changes proposed are:
    • Reduction of duty on taxis and cars for the physically handicapped from 30% to 25%.
    • Reduction of duty on polyester filament yarn from 40% to 30%.
    • Reduction of duty on cosmetics and toilet preparations from 40% to 30%.
    • Reduction of duty on glazed tiles from 30% to 25%
    • Reduction of duty on airconditioners from 40% to 30%.


  12. Mr. Speaker, Sir, smoking in public is banned in Delhi. The fight against cancer and respiratory diseases continues. My contribution will be to increase the excise duty on non-filter cigarettes, not exceeding 60 mm in length, popularly called mini cigarettes, from Rs.75 per thousand to Rs.90 per thousand. I have also increased the excise duty on other categories of cigarettes. The increases range from Rs.20 to Rs.70 per thousand. There has been no increase in the excise duty on biris since 1993. I, therefore, propose to increase the excise duty on biris from Rs.5 per thousand to Rs.6 per thousand. The impact of this duty change on the retail price would only be 2 paise for a bundle of 20 biris. As regards cigarettes, the increase would be 15 times more for every mini cigarette.

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