Revenue Board faces uphill task in abolishing central excise duty

ISLAMABAD (March 08 2003) : The Central Board of Revenue (CBR) will be facing an uphill task in the coming budget while abolishing central excise regime through gradual phasing out of excisable commodities or transformation of remaining services into the GST regime, sources told Business Recorder on Friday.

First, transformation of insurance services to GST mode would directly hurt the collection of excise duty during current fiscal year and onwards.

The shifting of insurance services to the GST mode require amendment in the constitution, which is another cumbersome procedure for the authorities as it needs approval from National Assembly.

Second, the collection of excise duty would be badly affected in case of total abolition of excise regime.

Major contributors of CED are tobacco/cigarettes, cement, POL products, natural gas, beverages, beverage concentrate, soap/detergent, paper and paperboard, wire and cable, perfumery and cosmetics and paint/varnishes.

Sources said that CED is one of the major indirect taxes. It is primarily aimed at regulating the consumption of certain commodities and services such as cigarettes, POL products, insurance etc and in turn yield substantial revenue. In 2001-02, out of 18 products 17 were chargeable at the import and local stage.

Due to expansion of sales tax apparatus, its imposition at the retail stage and gradual withdrawal of sales tax exemptions, the role of excise duty would be phased out. Its documentation is being made simpler.

Furthermore, the CBR also incorporated a 'clause' in the central excise laws to permit adjustment of CED as allowed in case of sales tax.

Presently, 18 collectorates are engaged in collection of CED and refund, whereas the central excise export rebate is paid by the Export Collectorate, Karachi.

The Central Excise Export Rebate is also an important part of the excise regime as the CED paid in the process of manufacturing the items to be exported, is refunded.

However, due to withdrawal of CED on a number of items, the duty drawback of central excise on export is also being reviewed from time to time and those items on which CED is no more livable are being withdrawn from duty drawback regime.

The annual target of CED for the current fiscal is Rs 47.5 billion, while quarterly break-up indicates target of second quarter 2002-2003 as Rs 10.9 billion; third quarter Rs 11.7 billion, and fourth quarter Rs 14.3 billion.

A comparison of 2001-02 and 2000-01 excise collection reflects that collection from tobacco/cigarettes was Rs 16,562 million in 2001-02 against Rs 16,358 million in 2000-01; cement, Rs 9,950 million against Rs 10,701; POL products, Rs 5,008 million against Rs 5,334 million; natural gas, Rs 4,203 million against Rs 4,079 million; and collection of excise duty from beverages amounted to Rs 2,850 million in 2001-02 against Rs 2,644 million in corresponding period previous fiscal year.

Presently, domestic travel by air; train; carriage of goods by air; and services provided or rendered by persons engaged in telecommunication work ie telephone, telex, telegraph, telefax are liable to CED under sales tax mode.

The government has to consider all factors before taking any decisive step like total abolition of central excise regime in the budget, sources added.

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