Finance Minister P. Chidambaram with CII president R. Seshasayee (right) in New Delhi on Wednesday. (PTI)

New Delhi, March 7: The government today said it would consider withdrawing most tax exemptions except those needed for development of key areas, even as it asked companies not to evade excise duty.

The key areas include promotion of research and development activities, knowledge areas and welfare of senior citizens. “Every exemption ... as the Prime Minister has said, will be examined. Every exemption that have to be removed will be removed,” Chidambaram told industrialists in a post-budget interaction organised by the Confederation of Indian Industry (CII).

He ridiculed industry’s continuous demands for tax exemptions year after year. “Every exemption has a father, every exemption has a grand parent... parent or a foster parent,” he said, adding that all their demands are with an aim to get tax exemptions.

He, however, was a little considerate regarding the agriculture sector — one of the prime focus areas of the government.

According to estimates, the government has suffered a revenue loss of Rs 235,191 crore on account of tax exemptions in 2006-07, which is approximately 50 per cent of all tax collections, against Rs 206,700 crore revenue loss in the previous year.

On withdrawal of tax exemption to certain categories of venture capitals (VC), Chidambaram said, “By definition, VCs are high-risk investments, which have been granted tax exemptions. It is up to the government to decide the areas in which it wants the investment to move.”

He said the priority of the budget was agriculture though industry may not agree with this.

In a separate meeting, Chidambaram cautioned companies on excise duty evasion saying it will “haunt” them in future.

“I am inclined to believe that there is a sizeable evasion in excise duty. I would urge corporates to pay excise duty just as they are paying corporate income and service taxes,” he said.

“Evading duties do not pay in the long run. One black mark will haunt you throughout the year,” said Chidambaram after launching the electronic payment system for excise duty and service tax.

Seeking explanation from industry on payment of excise duty, he said, “When economy is growing at 8.5-9 per cent and manufacturing by double digits, excise collections should also grow at the same rate.”

Revising down its target of excise duty collections, the finance ministry has estimated that it will be able to collect Rs 117,266 crore for this fiscal against the earlier estimate of Rs 119,000 crore.

Expressing dissatisfaction, he said corporate income tax and service tax collections have not been commensurate with excise duty collections. Consecutively, the government will focus on collecting excise duty in fiscal 2007-08.