The Hindu Business Line : Cement sector to seek lower excise rates

THE Indian cement industry, which is faced with one of the highest excise duty incidence among domestic product categories, also pays the highest tax as compared to its counterparts worldwide.

The industry, in its wishlist for the forthcoming Budget, is planning to lobby for lower excise duty and paring down of other levies, which have a cumulative incidence of around 30 per cent of the sale price for a bag of cement currently. The industry is, however, in favour of continuing with the specific duty regime, instead of the ad valorem duty rate structure being followed for most products.

The specific duty of Rs 400 per tonne, levied on the cement industry currently, translates into an ad valorem excise duty rate of around 30 per cent of the selling price, according to industry estimates. The peak excise duty, on the other hand, is much lower at just 24 per cent, contend industry players. "If the duty structure is anything to go by, cement has been categorised as a luxury item, thereby attracting the highest duty rate. The excise duties need to be pared in light of cement being a major constituent of the infrastructure sector," an executive with a cement company said.

According to an ICRA report, the heavily taxed cement industry has to contend with a host of Central and State levies, including the Central excise duty, sales tax levied by State Governments, royalty and cess on limestone and coal and duties on power tariff. These duties account for around 30 per cent of the sale price of cement or around 70 per cent of the ex-factory price (excluding local transport and margins), according to the report..

The duties, as a percentage of selling price of cement, works out to much lower at 20 per cent in Taiwan, around 12 per cent in Germany, 10 per cent in South Korea and below five per cent in Japan and Malaysia, as compared to the effective 30 per cent levied in India, according to industry estimates.

The cement manufacturers are, however, opposed to any shift from the existing specific duty regime to an ad valorem structure, which is expected to take care of inflation adjustments. The industry has requested for continuing with the specific rates as there was no question of inflation adjustments as the cement prices were lower than what they were around five years ago, according to industry players.

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