The Hindu Business Line : For goods not under MRP-based assessment — Budget may introduce excise levy at `first point of sale'

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For goods not under MRP-based assessment — Budget may introduce excise levy at `first point of sale'

Harish Damodaran
K.R. Srivats

The move, according to official sources, would help bolster revenues from a host of pharma and textile items, whose brand value and other `intangibles' are currently not captured during excise assessment.

New Delhi , June 7

THE 2004-05 Union Budget may introduce a system of levying excise at the `first point of sale' on products that are not covered under the Maximum Retail Price (MRP)-based assessment.

While the MRP-based system of levying excise has helped the Finance Ministry boost its revenues by tapping value additions that take place beyond the factory gate, the sources, however, said that its coverage was potentially limited to only those goods covered under the Standards of Weights and Measures Act, 1976.

In fact, Section 4A of the Central Excise Act, 1944 provides for levy of MRP-based excise only in respect of specified goods under the Standards of Weights and Measures Act.

This automatically leaves out several goods, which are manufactured through job work. There are cases where leading pharma companies get medicines manufactured by small-scale units and where the excise gets levied on the job-worker's factory gate price, basically covering only the cost of inputs and labour. But on the other hand, the company sourcing the drug from the job-worker sells it at a huge premium by leveraging its own brand value.

"By charging excise on the first point of sale price rather than the factory-gate price, the Revenue Department will be able to mop up huge sums, particularly from products that are not covered under MRP-based assessment," the sources added.

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