Budget 2014: 'Saviour' FM P. Chidambaram's cut in excise duty hailed by tax experts

Written by PTI | Mumbai | Updated: Feb 18 2014, 00:53am hrs
PTax experts have hailed Finance Minister P. Chidambaram's decision to slash excise duty.
Tax experts have hailed Budget 2014 decision to slash excise duty, which was announced by Finance Minister P. Chidambaram in Parliament, saying the move will give the much-needed boost to auto, capital goods and white goods sectors which have borne the brunt of slowdown.

"The excise duty reduction will save the automobile sector from going into the emergency ward. It will boost capital good sectors so that it is ready when the investment demand rises," Desai, Haribhakti & Co Chairman Shailesh Haribhakti said.

Dinesh Kanabar, Deputy CEO at KPMG India, said: "The interim budget is on expected lines. The significant positive is the reduction in excise duty on capital goods, which should give impetus to capital spends, and white goods that should give impetus to consumer spends.

"The auto sector has a lot to cheer for. Clearly, with the elections round the corner, the current proposals will be viewed as interim ones and their true impact will be felt when these are incorporated in the final budget."

He also said the Finance Minister P. Chidambaram deserves credit for containing the fiscal deficit at 4.6 per cent and CAD at USD 45 billion in 2013-14.

P. Chidambaram reduced the excise duty on capital goods from 12 to 10 per cent and on mobile handsets to 6 per cent and in the case of automobile having different duty rate the reduction is by 2-6 per cent. These reductions will be applicable till June 30, 2014.

The customs duty has been reduced on the non-edible oils used in soap making it 7.5 per cent and exemption of countervailing duty on specified machinery for road construction has been withdrawn. The minister also exempted service tax on warehousing of rice and blood banks.

Tax firm Khaitan & Co's Executive Director Nihal Kothari said: "The minister has announced reduction in excise duty in the case of three sectors facing deceleration in manufacturing growth. The above change will give some temporary relief to selected sectors.

Ketan Dalal, joint tax leader at PwC India, said the interim budget the duty cuts will hopefully have some effect on boosting these segments, particularly automobiles, which is reeling under one of the worst slowdowns in the recent memory.

Naresh Takkar of Icra said the targeted reduction in excise duty to support the languishing sectors is welcome, although the extent of revival may be inhibited by the short time-frame and sluggish economic activity, as well as weak sentiments.

Deloitte India Senior Director Kumar Kandaswamy said the duty cut will particularly make the borderline customers make a decision in favour of a car or to look for a higher segment. Clearly, this will have an impact up to a point, he added.

On duty cut on SUVs, he said: "The fact that the rate cut applies to SUVs is significant.... SUVs have been given the benefit possibly because of the fact that diesel will eventually get sold at market prices and the additional burden that was imposed on the SUVs in the recent past is sought to be removed."

Arun Singh of Dun & Bradstreet India said the excise duty cut will help to bring some cheer to the sectors, although for the interim period.

Budget 2014-15 February 17