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Our Bureau

Dual excise duty structure dropped

New Delhi/Mumbai May 3 Admitting that the dual excise duty structure proposed in Budget 2007-08 had failed to elicit desired response from cement players, the Finance Minster Mr P. Chidambaram, on Thursday announced an ad valorem duty of 12 per cent for cement selling above Rs 190 for a 50-kg bag, instead of the increased specific duty of Rs 600 per tonne proposed in the Budget.

Cement selling at a price below Rs 190 would, however, continue to enjoy the reduced duty of Rs 350 per tonne announced as part of the Budget proposals.

"For cement sold for more than Rs 190 per bag, instead of a specific (excise) rate, we are introducing an ad valorem rate of duty at 12 per cent of the retail sales price which is marked on the bag," Mr Chidambaram said while replying to the debate on Finance Bill 2007-08 in Lok Sabha.

"The dual duty structure has not brought the desired results, and hence there is no point in continuing with the same... Therefore, after careful consideration it has been decided to replace the dual rate," he said.

Reduction

Mr Chidambaram said, "The result will be that there will be effective reduction of Rs 7 per bag on the excise duty liability," he said. "It is my expectation that the cement industry will respond positively and reduce the price of cement."

In his Budget speech on February 28, the Finance Minister had introduced a dual excise duty structure on cement manufacturers. According to the proposal, cement companies had to pay an excise tax of Rs 600 per tonne if they priced a 50-kg bag at over Rs 190, while those selling below the cut-off price were required to shell out a lower excise duty of Rs 350 per tonne. The cement sector was facing a flat excise duty of Rs 400 per tonne previously. The dual duty structure was opposed by the industry, which responded by jacking up prices across most markets citing the higher incidence of excise as the reason for the move.

Reacting to the new ad valorem duty rate of 12 per cent, a senior executive from a cement major said: "In a nutshell they have tried to simplify excise duty. This is what should have been done long ago. It could mean a reduction in cement price depending on what one's MRP is." But ad valorem duty is not so easily implemented in India, he added.

An executive from another cement major said: "This is a pass through for industry anyway, so ultimately, it does not matter to us, if it works out to a few rupees less or more on a bag (50 kg) of cement. Also we must see how valuations and assessments are going to be done and how this ad valorem is going to be computed. Otherwise it is very difficult to say exactly what the price impact of this move will be."

More Stories on : Cement | Excise and Customs | Policy | Budget

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