Finance minister Yashwant Sinha has made the excise duty structure much simpler by proposing a central rate of 16 per cent, a merit rate of 8 per cent and a demerit rate of 24 per cent.

Products which presently attract excise duty rates between five to 12 per cent will henceforth have a uniform rate of eight per cent. The 13-18 per cent slab has been rationalised at 16 per cent while the 25-40 per cent slab has been reduced to 24 per cent. However, the finance minister has imposed two slabs of surcharge - 6 per cent and 16 per cent -- on products which presently attract a duty of 30 per cent and 40 per cent, respectively.The Modvat credit availment has been restored to 100 per cent from 95 per cent.

The changes in the excise duty structure have been made in a such a manner that the duty on almost 50 per cent of theproducts have remained unchanged. For the balance 50 per cent, the proposed rates are two to three per cent higher or lower over the prevailing rates.

Overall, the changes in the excise duty structure are minor, which is likely to make several domestic industrial sectors unhappy since corporate tax rates has been hiked at the same time.

The finance minister has granted the biggest concession on the excise duty front to the packaged tea manufacturers by abolishing the eight per cent duty but at the same time slapped a duty of Rs 2 per kg on bulk tea.

The biggest disappointment has come for the automobile sector, especially in the wake of recent statements of industry minister Sikander Bakht that the industry would be granted concessions to boost demand. The finance minister has hiked excise duty by one per cent on heavy commercial vehicles while keeping the duty on cars unchanged.

Further rationalisation of excise duty is likely as the finance minister has announced appointment of an expert panel toexamine need for retention or removal of concessions in duty to certain commodities.

Products on which the excise duty has been hiked include mini cigarettes (non-filter) from Rs 100 to Rs 110; motors and generators, tractors (above 1800 cc), ice cream, condensed milk and malt, tyres and tubes for two wheelers (13 to 16 per cent); furnace oil, cotton yarn (5 to 8 per cent); aviation turbine fuel, high speed diesel oil, light diesel oil, furnace oil, bitumen, wax, motor vehicle parts, mopeds, allopathic and pharmaceutical products, footwear and parts, iron and steel (primary products), copper, nickel, lead, aluminium, zincs and articles thereof (15 to 16).