Central excise duty abolition on major items ruled out

ISLAMABAD (April 29 2003) : The tax managers have ruled out abolition of central excise duty (CED) on major revenue generating commodities like cigarettes, beverages, cosmetics, etc in the next budget, terming the proposal to do away with excise regime as impracticable.

Highest amount of CED is received through items like tobacco and its by-products, whereas CED is coming from just eleven major excisable commodities, which could not be abolished without generating revenue from other sources to bridge the gap.

Officials engaged in the tax reform process told Business Recorder here on Monday that major excise duty spinners have to be retained in the coming budget to avoid drastic reduction in revenue.

Moreover, this would be against government's commitment to generate more tax from certain excisable commodities liable to higher CED rates.

“It is not possible to totally abolish excise regime with a stroke of pen in budget,” sources said.

Similarly, the government will maintain higher tax rates on alcohol, mineral water and other commodities consumed by the upper strata of the society.

The government would have to suffer a huge loss of Rs 50 billion after withdrawal of excise regime, as net collection of CED decreased from Rs 49,080 million in 2000-01 to Rs 47,186 million in 2001-02, or 3.9 percent.

Sources said that the basic concept of VAT mode is that the excisable commodities should gradually transformed into the GST regime.

They said that basically excise regime is an old way of collecting tax from certain sectors, which needs to be updated in line with the modern techniques of automation and VAT mode.

The basic idea is to merge the excisable commodities into the GST regime. Due to expansion of sales tax net, its imposition at the retail stage and gradual withdrawal of sales tax exemptions, the role of central excise is being phased out.

Its documentation is being continually made simpler and important changes have been made by incorporating a clause in central excise laws, a clause allowing adjustment of CED as being allowed in sales tax, sources added.

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