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Industry & Economy - Tyres

Tyre cos hope for more sales mileage

K.R. Srivats

NEW DELHI, Feb. 28

IN a major relief to the nearly Rs 9,700-crore tyre industry, the Finance Ministry has agreed to a proposal that would allow tyre companies in the country to use "averaged freight" in their invoices while clearing goods from their factories and depots.

Customers of these companies also have a cause for cheer, with the Budget reducing the overall excise and customs duty burden on the industry and some of the manufacturers already promising to pass on such benefits to those in the replacement segment.

"The rationalisation of excise duty will boost activity in the industry. It will stimulate growth in the tyre industry. We will also pass on the benefits arising from the rationalisation", the Chairman and Managing Director of Apollo Tyres, Mr Onkar Kanwar, said.

Hitherto, under the transaction value based excise system, the tyre companies were required to mention the actual freight incurred for delivering the goods to the customers. This was creating problems and had been considered as an irritant as regards compliance with the excise laws.

"Freight averaging is a simplification in procedure that we have been pleading for. It would not result in any revenue outgo for the Government or the industry. But the companies can now average the total freight bill for the company in a period and declare them in every invoice. The average rate can be used and the destination will not matter", a senior tyre industry official said.

The Finance Bill, 2003 provides that "average freight, determined in accordance with the generally accepted principles of costing, would be admissible for deduction in respect of transportation beyond the place of removal, where price at the place of removal is not known".

The Finance Minister, Mr Jaswant Singh, today announced a reduction in special excise duty (SED) on tyres from 16 per cent to 8 per cent, thereby taking the excise duty of tyres for the replacement segment to 24 per cent as against 32 per cent now. The tyre industry, which imports large quantities of its raw materials, will also benefit from the reduction in peak customs duty from the current 30 per cent to 25 per cent.

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