COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

FM unveils plans to improve excise and customs collection

Finance Minister Yashwant Sinha has said steps would be taken to improve tax collection, especially excise duties, whose ratio with respect to GDP has been constantly declining over the past few years.

Inaugurating a conference of chief commissioners of customs and excise in New Delhi today, Sinha said the government was planning simpler excise and customs norms. There would be a simplified three-tier excise duty structure.

The existing slabs of eight to nine different rates would coalesced into three broadly defined rates, thus making an enormous step forward in simplifying to excise duty structure. "This will be an enormous step forward for simplification of excise duties," he said in Bangalore yesterday, adding that the three rates of mean, merit and demerit would be decided on the pattern of consumption in the country.

Sinha exhorted the revenue department to be liberal in dealing with honest tax payers, while coming down heavily on those who do not give their legitimate revenue to the government.

Sinha said the broad classification would consider consumption patterns before fixing excise rates. The broad principle would be that necessities would enjoy zero rates of taxation and as one moves on the ladder luxury taxes would rise.

He said six working groups on excise and customs had been formed to prepare the ground for major initiatives that were required to be taken in the next year's Budget.

The finance minister said he would announce a sector-specific plan of action to give these a boost.

Sinha said anomalies in the customs structure relating to the broad principle of high duty on raw materials, a little less duty on intermediates and least duty on final products would be rectified.

A team has been set up in the ministry to prepare the next year's Budget.

The finance minister reiterated that the fiscal deficit would be kept at the projected level of 5.6 per cent. He said he could have fixed a lower fiscal deficit target, but that would not have been realistic.

Sinha said there was time till October, when the groups on customs and excise would submit their report, to define, redefine and further improve upon the tax structure.

He said on the customs side also the finance ministry was trying to reduce the rates.

The finance minister said his ministry was looking at each commodity so that the customs tariff could be an aid to development.

Sinha said his government wants to equip custom houses with the most modern facilities to test the products that were imported. ''I will not let expenditure come in the way of this,'' he said.

He said there were suggestions that the job should be entrusted to the private sector. The finance minister, however, said the job would be given to official agencies so that the mischievous do not escape.

Yesterday, Sinha concluded a two-day visit to Bangalore during which he interacted with the captains of industry. He also reviewed the south zone performance of excise, customs and income-tax collections during the first four months of the current fiscal year.

Sinha said the process of reform of the customs and excise tax structures had already begun and six working groups had been set up to look into the present system and come out with suggestions. The working groups would submit their report before October 31 and the government would have enough time to incorporate them in the Budget for 1999-2000.

The minister said he expected an economic turnaround with a high growth trajectory and denied that political instability had been a contributory factor to the low business sentiment. He refused to identify any single specific cause for the poor economic performance.

He said the government adopted a twin strategy: to increase the expenditure on infrastructure sectors and clear all pending private sector projects.

He said there would also be intensive periodic reviews of ongoing projects so that there was no slackness in their implementation.

Sinha said there was no reason for any despondency on the tax front as the government would be able to meet the Budget target. On collections, he said the corporate tax collections went up by 121 per cent and income tax collections by 6.42 per cent between April and July this year comparead to last year.

He said he was not in favour of hardening of interest rates. He said the market borrowings of the government were likely to be taken care of before the busy season sets in and the government borrowings would not contribute to hardening of interest rates.

On impact of sanctions following the Pokhran nuclear tests, he said there would be no impact this year. The government would take care to provide guarantees to the projects which were affected by the stoppage of the United States' Exim Bank credit. They would be now covered by the financial institutions in the country.

On the impact of the Fifth Pay Commission Report, Sinha made it clear that the Union government had no plans to compensate the states. The commission's recommendations pertained only to the central government staff.

UNI