Finance Minister Nirmala Sitharaman on Monday announced an additional cess on petrol and diesel while presenting the Union Budget for 2021-’22, but clarified that it will not lead to any additional burden on the consumers.
The Budget proposed an agriculture infrastructure and development cess of Rs 2.50 per litre on petrol and Rs 4 per litre on diesel. The increase in fuel prices, however, will be offset by reductions in basic excise duty and the special additional excise duty levied on them currently, the finance minister said. The move can be attributed to the Centre’s motive of keeping a larger share of taxes on fuel products with itself. Unlike excise duty, it does not need to share revenues collected under cesses with the states.
The finance minister announced that an agriculture infrastructure and development cess will be imposed on foreign-made alcoholic beverages as well. However, in this case too, the basic customs duty on these products have been cut to reduce the burden on the common man. The Budget proposed to reduce the basic customs duty on alcoholic beverages to 50% from the existing rates of 100%-150%, and then impose a 100% cess on the revised customs.
Here is an example to explain how alcohol prices will change under the revised tariff:
The basic customs duty is levied on “assessment value” of goods that get imported. Now, assessment value is in turn charged at 1% of the landing cost of the product.
For instance, if the landing cost of a bottle of whiskey is Rs 500, the assessment cost will be Rs 5. Under the previous customs rate, if the whiskey attracted a 100% duty, it would come at Rs 5. So, the retail price would come at Rs 510.
Now under the new rates, basic customs duty will be reduced to 50% of the assessment cost of Rs 5, which comes at Rs 2.50. The new cess will be levied at 100% on Rs 7.50 (assessment cost + customs duty). The cess will thus come at an additional Rs 7.50, pushing the retail price of the whiskey to Rs 515.
The cess will also be levied at different rates, on customs component of some other items like gold and silver bars (2.5%), crude palm oil (17.5%), soyabean and sunflower oil (20%), chickpeas (50%) and lentil (20%). However, the basic customs duty on all these products have been cut too.
“We are expecting Rs 30,000 crore through agriculture infrastructure and development cess,” said Finance Secretary AB Pandey. “This cess has been designed such a manner that it won’t impact common man.”
The finance minister also announced an increase in the customs duty on a number of products, aimed to benefit “farmer, MSME [Micro, Small and Medium Enterprises] and other domestic manufacturers”.
Under these announcements, imported leather goods (from nil to 10% duty), gems and jewellery (from 7.5% to 15%), mobile phone batteries (nil to 2.5%), compressors for refrigerators (from 12.5% to 15%), are among items that will get costlier. Solar inverters, lanterns and lamps will also get more expensive.
On the other hand, custom duty has been cut on these items, making them cheaper: nylon-based textile (7.5% to 5%), selected iron and stainless steel products (10% to 7.5%), engines and other parts of defence aircrafts (2.5% to nil), gold and silver bars and coins.
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