The Hindu Business Line : Cenvat rate cut not to cover tobacco products: Finance Ministry

The 4 percentage-point Cenvat rate cut announced by the Government on Sunday as part of the fiscal stimulus package does not cover tobacco products, the Finance Ministry has said.

“No change has been made in the excise duty rates on petroleum products, specific rated items and tobacco products,” a Central Board of Excise and Customs (CBEC) official said.

The 4 percentage point Cenvat rate cut is expected to result in revenue foregone of Rs 8,700 crore for the Government in the remaining part of the fiscal.

At present, cigarettes attract duty at varying rates depending upon whether they are filter or non-filter and their length. In Budget 2008-09, the Centre had hiked the excise duty rates on non-filter cigarettes to bring them at par with filter cigarettes of corresponding length.

Excise duty rates were revised on non-filter cigarettes (not exceeding 60 mm in length) from Rs 168 for 1,000 sticks to Rs 819. For non-filter cigarettes (exceeding 60 mm but not exceeding 70 mm in length), the excise duty was hiked from Rs 546 for 1,000 sticks to Rs 1,323.

“There is no impact at all on us. The ad-valorem 4 percentage point cut announced on Sunday does not cover tobacco products,” a spokesperson for Godfrey Phillips told Business Line, when asked if customers could expect price cuts from the company on the back of fiscal stimulus package.

Ms Bhavna Sood, Vice-President, Corporate Communications, DS Group, the makers of the flavoured chewing tobacco Baba, said the 4 percentage point reduction in Cenvat rate does not apply to tobacco products.

Even for Rajnigandha pan masala, not containing tobacco, packed in pouches, she noted that there was no excise duty relief from Sunday’s announcements as the basis of levy of excise duty was on the production capacity. Almost 98 per cent of the sales volumes of Rajnigandha pan masala came under the packaging form of pouches.

From July 1, to tackle excise duty evasion in the sector, the basis of levy of excise duty on pan masala was changed to production capacity. Prior to that, an optional scheme existed for payment of excise duty on the basis of compounded levy for pan masala and gutkha.

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