PMEAC pushes for single Cenvat rate above 8% 

EAC Outlook Suggests Bringing Goods, Services On Par To Set Stage For GST Rollout 

The Prime Ministers Economic Advisory Council has pitched for a single production tax, or Cenvat, that is higher than the current 8%, clearly indicating that key policymakers favour a withdrawal of the stimulus measures through a hike in excise duty rates while simultaneously setting the stage for the rollout of the proposed goods and services tax. 
The EACs Economic Outlook for 2009-10 , which will be released on Friday , has suggested that the government consider a Cenvat rate that is higher than the present 8% but lower than the pre-financial crisis rate of 14%, a person privy to the development told ET. Cenvat refers to the median excise duty rate, applicable on nearly 90% of the goods manufactured in the country. 
The council is pitching for a single Cenvat rate for tax on goods as also bringing both goods and services on a par to lay the ground for a switchover to GST regime as the government plans to wind down stimulus measures. 
The government had cut the Cenvat rate to 10% from 14% in December 2008 and by another 2 percentage points to 8% in the interim budget in February 2009. The service tax rate was cut to 10% from 12%. 
President Pratibha Patil, who will address the joint session of Parliament on the first day of the budget session, is also likely to allude to the suggestion made by the EAC in her speech, outlining the governments intent to implement the suggestion, the person said. 
The government is likely to kick off withdrawal of stimulus measures in the forthcoming budget with the economy staging a strong rebound. Industrial production grew at a smart 16.8% clip in December compared with the 0.25% decline in December 2008. 
Increased government expenditure and tax cuts taken to bolster the economy are budgeted to push the fiscal deficit to a 16-year high of 6.8% of the GDP in 2009-10 . The EAC is pegging its growth forecast for 2009-10 at 7.5% and 2010-11 at over 8% in the outlook. 
A similar projection was made by finance minister Pranab Mukherjee while addressing an international seminar on transfer pricing on Wednesday. The IIP figures for December 2009 suggest that we may end 2009-10 with a growth rate of 7.5% and next year at over 8%, he said. 

Economic Times, New Delhi, 18-02-2010.

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