Govt allows higher production of pan masala, gutka; hikes excise duty

The government has allowed increased production of pan masala and tobacco products, including gutka, chewing tobacco and increased the excise duty applicable on them with a view to increase tax revenue.

The government also imposed a five-per cent export duty on iron ore pellets.

''Considering the potential tax gains of increased production with the increase in the average speed of packing machines, the government has revised the capacity of production and increased the duty applicable to pan masala and tobacco products, including gutka, chewing tobacco, unmanufactured tobacco and filter khaini packed in pouches,'' a government release said.

Excise duty is levied on pan masala and tobacco products packed in pouches with the aid of packaging machines on the basis of the capacity of production, which is determined on the basis of the average speed of packing machines of pouches of various retail sale prices.

The duty rate on these goods was last revised in the 2012-13 budget.

CBEC has issued notifications to specify the amended deemed production of these goods in pouches of various retail sale prices and the duty payable in respect of these goods packed in pouches of various retail sale prices.

The notification said the export duty of 5 per cent on iron ore pellets has been imposed, considering the domestic requirement of iron ore pellets.

At present, iron ore fines and lumps can be levied an export duty of 30 per cent. Iron ore pellets are, however, exempt from export duty.

In 2012-13, exports of iron ore pellets were negligible. However, in April-November 2013, exports of iron ore pellets have risen sharply, causing an apprehension about shortage of iron ore in the country. Iron ore is a critical raw material required for production of steel.