CBEC wants median rate for Cenvat hiked to 18%

The Central Board of Excise and Customs has asked Finance Minister P Chidambaram to consider raising the median rate of the Central Value Added Tax (Cenvat) to at least 18 per cent from 16 per cent now, disallow any further excise exemptions and give special emphasis on beefing up the collection machinery. 
 
In a study prepared for the minister, the CBEC has argued that a decade of robust industrial growth has not led to any increased excise collections. 
 
The officials have effectively prepared the ground for the minister to raise the Cenvat rate to ensure that excise duty collection for 2004-05 maintains at least a 14 per cent growth rate over that of 2003-04. 
 
A major issue the CBEC is grappling with is the rapid rise in Cenvat credit. The collection trend till March 2004 shows that while excise duties net of refund have touched Rs 93,021 crore (Rs 930.21 billion), the total Cenvat credit availed by industry, but which does not accrue to the government, has reached 72

per cent of it. 
 
This is almost 10 per cent more than the credit availed by India Inc in 2002-03. In April this year, excise has, however, shown a healthy growth of almost 16 per cent over that of April 2003-04. 
 
According to CBEC officials, the minister has also reviewed the impact of the giveaways announced by his predecessor Jaswant Singh. 
 
The officials said if more exemptions were given, it would be difficult to collect even Rs 100,000 crore (Rs 1,000 billion) from excise duties in the current fiscal. The target set in the interim Budget for 2004-05 was Rs 1,07,199 crore (Rs 1,071.99 billion). 
 
The study also said there was an urgent need to strengthen the enforcement machinery. This is because the number of excise duty assessees have jumped from about 80,000 to 2,10,000 within one year due to the bringing in of textile processing units under the Cenvat chain in the 2003-04 Budget.