The excise duty reduction from 8 per cent to 4 per cent, announced by the central government on December 8, 2008 as part of a stimulus package to the industry to tide over the sagging economic scenario, is likely to continue after the end of this financial year as the economic downturn, analysts believe, is yet to be bottomed out.
The stimulus package was announced by the government to partly compensate the industry for the losses made by the industry due to the global economic crisis. Since the financial crisis in the world is far from over the government is unlikely to withdraw the across the board reduction in excise reduction from 8 to 4 per cent announced on December 8 last year.
There are apprehensions among the industry whether the excise reduction will be carried forward by the government after the end of the current financial year. There are reports among the industry circles that the government will withdraw the package after the end of the financial year on March 31. The reports gathered strength when the Central government's interim budget, presented by stand-in finance minister Pranab Mukherjee on February 16, kept silent on the issue.
But, observers feel that there is no need for the government to make any reference on the continuation of the stimulus package in the budget as the notification issued by the government in this regard on December 8 last year did not mention any date for the expiry of the package. So, the package is likely to continue till the financial crisis is over and the economy is back on track.
For the drug manufacturers in the non excise free zones in the country, the continuation of the excise reduction is very significant as it had given them a level playing field vis-à-vis the manufacturers in the excise free zones like Baddi in Himachal Pradesh and Uttarakhand. The companies in the non excise free zones, who have been fighting for the survival for the last several years due to the disparity in tax structure, started getting business after the government decision to reduce the excise duty from 8 to 4 per cent.
It is reported that the central government's excise reduction from 8 to 4 per cent has hastened the return of several companies from the excise free zones which had migrated to these zones to take advantage of the excise benefits announced by the government earlier.