The President on Thursday promulgated an ordinance amending the Central Excise Tariff Act, arming the finance ministry with emergency powers to hike excise duties on dutiable items to any limit.
Soon after the ordinance was signed, the finance ministry clarified that the ordinance would be used only to hike the excise duty on petro products and there was no proposal to hike the duty on any other good or commodity. This sets at rest speculation that the ordinance would be used to hiking the duty rates on consumer items, including consumer durables.
The ministry stated that excise duty would be hiked without affecting the retail prices of the petro products. This means that though the rates of duty would be hiked for the oil companies, they would not be passing on the duty burden to consumers. This is because the oil companies would be compensated in other ways, probably through tax-free oil bonds.
The ministry stated that the exact amount of adjustments were being worked out in consultation with the petroleum ministry and would be announced soon. The whole exercise is expected to yield the government some Rs 2,000 crore as a plus, though it would adversely impact the oil pool account.
The additional revenue is expected to go a long way towards bridging the fiscal deficit, which is expected to exceed the 4.7 per cent (as a percentage of GDP) targeted for the current financial year.
Till now, the finance ministry only had powers to hike excise duties on dutiable items to double the existing tariff rate on the items. The proposal to issue this ordinance was cleared by the Union Cabinet on Tuesday.
The passing of the ordinance indicates that the increases in excise duties are expected to be more than double at least on some items.
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