The Hindu Business Line : Call for clarity, consistency in excise duty on cement

Chennai, July 4 The cement industry is hoping as much for clarity and consistency in excise duty as abatement and concessions, according to a cross section of manufacturers.

Over the last two years, the union budgets have tinkered with excise duty on cement with a view to controlling the prices. This has resulted in continuous changes leading to uncertainty in the industry.

That apart, the changes resulted in increasing revenue to the exchequer and heartburn to the consumer as prices increased continuously with manufacturers passing on the hike.

Industry representatives pointed out that the prevailing rates of excise were uniform only in percentage terms, at 8.26 per cent, including education tax and cess.

However, the method of levying the excise depended on the buyer. On bag sales to traders, it was linked to the maximum retail price while it was on the selling price or landed cost when sold outside the trade and for bulk sales.This rate of duty was subject to the condition that it brought in a minimum of Rs 230 a tonne (Rs 11.50 a bag) as excise. The definition of the category of end buyer was open to discretion, they said.

The excise on a bag of cement is now around Rs 24 (Rs 480 a tonne).

Rather than levying tax on MRP, which can vary widely, it would be better to levy tax on the invoice value, they feel.

Cement is one of the highest taxed essential infrastructure inputs in India, with Government levies and taxes together accounting for more than half the ex-factory price. But anywhere else in the Asia-Pacific region the average tax on cement was 11.4 per cent with the highest levied by Sri Lanka at 20 per cent.

Within India all products attract a flat ad valorem rate and when levied on MRP, which includes VAT and freight, they benefit from an abatement of up to 40 per cent or more. But this concession is not available to cement where there is effectively a tax on tax.

This system had been arrived at after a number of changes over the last three years.

In the 2008 Budget, the Centre had put in place a three-tier system of excise on cement at 12 per cent for a 50-kg bag of MRP between Rs 190 and Rs 250, a specific excise duty of Rs 350 a tonne on cement priced less than Rs 190 and a specific rate of Rs 600 a tonne on cement costing more than Rs 250 a bag.

In 2007, the Centre hiked the excise on cement by Rs 200 and levied Rs 600 a tonne if the MRP was higher than Rs 190 a bag (February 2006 rates). As a sop to those selling cement at Rs 190 or lower the excise duty was cut to Rs 350 from the prevailing Rs 400.

Since then the cement output and prices have steeply increased on a sustained double digit demand growth. In 2008-09, the production was estimated at 182 million tonnes (mt), and in the 2009-10, it is expected to cross 200 mt. A bag of cement now costs close to Rs 300.

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