Financial Daily from THE HINDU group of publications
Tuesday, Aug 31, 2004
Financial Daily from THE HINDU group of publications Tuesday, Aug 31, 2004 |
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Industry & Economy
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Industry Associations Extension of Cenvat credit for inputs sought Richa Mishra
New Delhi , Aug. 30 THE draft Cenvat Credit Rules 2004, if accepted, may burden the FMCG majors such as P&G and HLL, and their marketers into paying more taxes. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the draft rules need to specify the input services. The draft Rules 2004 allows Cenvat credit for tax paid on services such as advertising, sales promotion, market research, storage and outward handling, which are not directly related to manufacture but are associated with sale of manufactured goods. However, availment of Cenvat credit facility on such services in the currently framed rules is restricted only to the producer of goods and not to the marketer and importer of dedicated third party produced goods, which respectively bear Cenvat or CVD on valuation based on end-consumer price. This would impact the FMCG sector most as it incurs heavy expenditure on advertising and sales promotion, according to a FICCI official. "Such marketers or importers end up paying double and cascading taxation — both the Cenvat or CVD and Service Tax — on these services," he said. The Chamber has urged the Government that input tax credit be allowed for services such as advertising, market research and sales promotion incurred by marketer or distributor against Cenvat paid by their dedicated and exclusive third party manufacturer of goods whose excise valuation is based on the maximum retail price. In a representation to the Central Board of Excise and Customs, the FICCI has urged the Government to consider the availability of Cenvat credit for input providers also. Further, the Chamber has also suggested that importers of finished goods on which CVD is payable, in lieu of Cenvat incidence on local production, be allowed Cenvat credit on CVD paid for goods defined under the rules for tax paid on such services.
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