New Delhi, Jan 31: Get ready to pay more for goods and services, as general excise duty and service tax may be hiked to the 2008-level in the Budget. Also, the fiscal deficit target for 2012-13 expected to be kept around 5 per cent.
“The blueprint for the Budget is being prepared with the aim of fiscal consolidation. This could result in bringing the general excise duty and service tax rate to pre-crisis or 2008 level.” The words ‘fiscal consolidation' are in focus especially after the Reserve Bank of India Governor talked about it earlier this month, a person familiar with the development told Business Line.
On December 7, 2008, the Government had brought down excise duty from 14 per cent to 10 per cent to mitigate the impact of the global financial crisis. The duty was further cut to 8 per cent on February 24, 2009. On February 26, 2010, the Finance Minister, Mr Pranab Mukherjee, rolled back the cut partially.
The service tax rate was also lowered from 12 per cent to 10 per cent on February 24, 2009. Both the cuts resulted in a loss to the exchequer. “Since this is the last opportunity for the Government to take a hard decision, so there is a thinking that the entire cut be rolled back,” he added.
But, there is a feeling that when industry is down and demand is depressed, raising duties may further hurt growth. But, more money after the cash reserve ratio cut and possible lowering of interest rate may help to sustain demand. This, in turn, will fuel growth, it is felt.
Another senior official said the fiscal deficit may be revised for 2011-12 from 4.6 per cent to 5.6 per cent. Expenditure cannot be brought down further while the revenue situation is very tight, so there is no option but to revise the deficit by 100 basis points, he added.
The fiscal deficit has already reached 92 per cent of the budgeted target in nine months (April-December) of the current fiscal.
Source : thehindubusinessline.com