The Telegraph
Since 1st March, 1999
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Kelkar wants 3-tier customs structure

New Delhi, Dec. 27: The high-level committee on indirect taxes headed by Vijay Kelkar has recommended a three-tier customs duty structure and a lowering of the median Cenvat rate to 14 per cent from the current 16 per cent.

The committee also brought services within the ambit of the Cenvat or central value added tax regime and suggested its integration with Service Tax Credit schemes with effect from April 11, 2003.

Briefing newspersons on the report, Kelkar said, ?With the proposed reforms, the potential gains to the economy would be Rs 4,000-5,000 crore per annum since there will be a 50 per cent reduction in the transaction costs.?

Kelkar said the special excise duty on certain goods, which at present are as high as 32 per cent, will be reduced by 4 per cent each year bringing them to the median 14 per cent rate by 2006-07.

?A zero-rate regime will continue for life saving drugs, sovereign products and agricultural products, 14 per cent on standardised items while automobiles and air conditioners will attract a duty of 20 per cent from 2005-06,? he said. At present, cars are levied excise at the rate of 32 per cent.

Kelkar added: ?The panel has suggested that the excise duty on kerosene may also be raised by Re 1 per litre to bring the duty on a par with diesel.?

The report said customs duty will be divided into three tiers: basic customs duty, additional duty of customs and anti-dumping/safeguard duties. ?It is proposed that the customs duty of zero per cent, 10 per cent and 20 per cent should be modified to 5, 8 and 10 per cent levels by 2006-07,? Kelkar said.

However, till 2004-05, customs duty on imports will be divided into two basic tiers of 10 per cent and 20 per cent and an additional zero duty tier for goods such as life saving drugs, defence and security, and atomic energy related imports. The 10 per cent slab will be applicable on raw materials, inputs and intermediate goods. The higher 20 per cent rate will be levied on all finished goods.

The committee has also recommended a higher duty of 150 per cent for specified agriculture products and demerit goods.

It has also recommended a cut in the import duty on crude oil from 15 per cent in 2003-04 to 8 per cent, which may further be reduced to 5 per cent in 2004-05. With respect to petro-products, it has been suggested a duty regime of 15 per cent by 2003-04 to be lowered to 10 per cent by 2004-05.

The panel has proposed a duty of 16 per cent on textiles till 2003-04 to be reduced to 14 per cent. However, it has suggested a hike in duties on all fibres and yarns from 8 per cent to 14 per cent. It has also recommended a lowering of duty rates on polyester filament yarn.

With respect to the small-scale sector, Kelkar said: ?Duty exemption should be applicable to units with a turnover of Rs 50 lakh, while for larger units the exemption should be brought down to Rs 50 lakh by 2005-06.?

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