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NEW DELHI, Dec. 27

RESISTING pressures from the food-processing industry, the Kelkar Committee has stuck to its original proposal of doing away with the excise exemption currently given to butter, cheese, edible oils (including vanaspati), infant foods, processed foods and vegetables and meat preparations. However, it has recommended continuing with the duty exemption in tea, coffee, spices and milk and cream.

In its final report submitted here on Friday, the Task Force on Indirect Taxes, headed by the Advisor to the Finance Minister, Dr Vijay Kelkar, has recommended that most food products now enjoying duty exemption be levied a six per cent excise duty (with Modvat credit set-off) from the coming fiscal itself. Further, the duty may be set at six per cent without any Modvat credit facility in 2004-05.

Although the final report's recommendation is a dilution of the Committee's original proposal — the draft `consultation paper' had suggested an eight per cent duty (with credit) in 2003-04 and eight per cent (without credit) in 2004-05 — the fact remains that the exercise of bringing in the processed food industry under the central excise net has finally been kick-started. The Task Force's report is expected to form a major input in the formulation of the coming 2003-04 Union Budget.

The Task Force has mooted an end to the excise exemption given now to butter and cheese, edible oils (including vanaspati and margarine), sauces, ketchups, seasonings, soups, jams, jellies, etc.

Besides, it has recommended doing away with the excise exemption on infant food preparations, namkeens, bhujias, mixtures, sweetmeats (mithais), fruit juice-based drinks and other preparations of fruits, vegetables and nuts. A similar treatment has been sought for meat and fish preparations.

At the same time, in a departure from its original proposal, the committee has said the excise exemption on milk (including that sold in pouches), milk powder, condensed and flavoured milk, tea, coffee and spices would be retained. Similarly, while in its original report, the Task Force had suggested that the existing specific rate of excise of Rs 71 per quintal on sugar (sold in the open market) be replaced by a flat ad valorem rate of eight per cent from 2003-04, the final report has said that the ad valorem rate be fixed at six per cent.

In the case of tea (manufactured), the report has recommended dismantling of even the existing Rs 1 per kg specific duty, while suggesting that the duty exemption given on green tea be continued.

The branded atta industry and breadmakers, too, stand unaffected by the Task Force's report. The report has said that the excise exemption ''can be retained'' for products of the milling industry (including flours) and bread. The same has been recommended for dried (but not prepared) vegetables, including potatoes, onions, mushrooms, peas and beans.

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