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Excise, Service Tax Hiked To Raise Rs 45,940 Cr

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The Budget for 2012-13 on Friday hiked excise duty and service tax by 2 per cent across-the- board to raise Rs 45,940 crore and offered marginal relief to individuals in income tax, stoking fears of adding to inflation but contained no big ticket reforms.

Prices of all non-oil goods are likely to go up on account of the 2 per cent raise in the effective rate of excise duty of 10 per cent and service tax as well as on account of the widening of tax net to all services, except 17.

Quoting from Shakespeare's immortal words in the 'Prince of Denmark' that "I must be cruel only to be kind", Finance Minister Pranab Mukherjee sought to raise an additional Rs 27,280 crore through customs and central excise levies and Rs 18,660 crore through service tax.

While the Opposition slammed the Budget as inflationary that will further burden the common man, a view shared by the corporates, Prime Minister Manmohan Singh and Mukhejree said it will help in fiscal consolidation and take the economy on growth path.

Corporates expressed disappointment that the government was not taking any serious steps at economic reforms and said it was a missed opportunity.

One bold move the Finance Minister intends to carry forward in the next three years is to bring down subsidies from 2 per cent of the GDP to 1.75 per cent, an intent that created speculation that the government could resort to hiking petrol and diesel prices.

However, Mukherjee in media interviews hedged the possibility saying there is need to carry all the coalition partners before a decision is taken in this regard.

The Budget left untouched the corporate taxes and the peak customs duty and gave tax concessions to infrastructure sectors like power, airlines, road and bridges and hospitals, cold-chain facility and affordable housing.