In the General Budget 2011-12, certain changes in the Central Excise Rate structure has been proposed to prepare the ground transition to GST. The exemption has been withdrawn on 130 items that are exempt from Central Excise Duty but chargeable to VAT. A nominal central excise duty of one per cent is being imposed on these 130 items that are mainly in the nature of consumer goods. No Cenvat credit would be available for the manufacture of these items. Presenting the Budget, the Union Finance Minister, Shri Pranab Mukherjee in the Lok Sabha today said that basic food and fuel would continue to be exempt. This levy would also not apply to precious metals and stones. In case of jewellery and articles of gold, silver and precious metals, the levy would apply only to goods sold under a brand name. The remaining 240 items would be brought into the tax net when GST is introduced.

The lower rate of Central Excise Duty has been enhanced from 4 per cent to 5 per cent, in line with the States’ increased merit rate of VAT.

For readymade garments and made-ups of textiles, the optional levy has been converted into a mandatory levy at a unified rate of 10 per cent. The levy would however, apply only to branded garments or made-ups and not to those tailored or made to order for a retail customer. Credit of tax paid on inputs, capital goods and input services would be available to manufacturers of these products. Export o these items would continued to be zero-rated.

Excise on consumer goods: nominal duty introduced; mandatory unified levy for branded readymade garments, with input credit and zero-rated exports. A budgetary change imposes a nominal central excise duty on 130 items formerly exempt, with no Cenvat credit for their manufacture; basic food, fuel and most precious metals remain exempt while branded jewellery is captured. The optional levy for readymade garments and made-ups is converted into a mandatory unified levy applicable only to branded items, with manufacturers entitled to input, capital goods and service credit and exports remaining zero-rated.