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Excise Duty and service tax hike may not yield desired result

Hike in excise duty and service tax rates will increase the input cost, fuel inflation and lead to further slowdown in economic growth, corporate leaders said at an interface with Finance Minister Pranab Mukherjee here.

Mr B Muthuraman president of CII said that "What comes as a disappointment is the timing of the hike in excise and service tax rates. This will not only derail the moderating trend in inflation but will also further add to the burden on industry by increasing input cost.”

Mr Muthuraman who is also TATA Steel's vice chairman said the duty hikes were unlikely to yield the desired revenue that the government is anticipating, instead it will further slow down the growth and add to inflationary pressures.

Mr Mukherjee in his Budget 2012-13 has increased both excise duty and service tax rate to 12% from 10% earlier, aimed at generating INR 45,940 crore additional revenue to the government's kitty

Ficci President R V Kanoria said a token relief in direct taxes will not offset increase in excise duties and service tax rate. He said that "Whereas, the move towards broadening the tax base and aligning the tax rates towards the impending GST is welcome, one cannot deny the impact on inflation, perpetuating the continuity of a tight monetary policy, which in turn will impact investments and consequently growth.”

Mr Rajkumar Dhoot president of ASSOCHAM said though several criticism could be heard from different quarters, a little detached look would take the Budget on different dimensions. He said that "In the midst of all this gloom, the Budget has struck a hopeful note. Pranabda, has recognized the importance of raising investment in the economy, more particularly, private investment.”

Stating that the Budget proposals apparently indicate that fiscal slippage had been uppermost in Mr Mukherjee's mind, Mr Muthuraman said the government should try to enumerate the value of land and other assets locked up in the Sick PSUs that cannot be revived.

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