No change in duty structure

K.R. Srivats

The organised players contribute about Rs 150 crore to the Exchequer towards excise duty (net of Cenvat credit).

New Delhi, May 19

The Finance Ministry has turned down the request of biscuit manufacturing companies for excise duty waiver on biscuits below Rs 61 a kg.

The Rs 4,500-crore domestic biscuit manufacturing industry had mooted a new excise duty structure to help tide over its pricing woes in the `low-price high-nutrition' (LPHN) biscuits category.

"The matter was examined and it was decided not to make any change in excise duty structure on biscuits," sources said.

Faced with spiralling input costs and low profit margins in the LPHN category, the domestic biscuit manufacturing industry had suggested to the Union Finance Minister that the excise duty on biscuits be categorised into two - one category for biscuits with price less than Rs 61 a kg and another for biscuits above the price mark.

Stating that the poor sections of society largely consume biscuits below Rs 61 a kg, the organised players in the domestic biscuit industry had sought excise duty waiver so as to bring them on par with the nil rate of excise duty on bread.

On biscuits above Rs 61 a kg, the domestic manufacturers were not averse to an eight per cent excise duty rate. Currently, all biscuits attract an ad valorem duty of eight per cent.

The organised players contribute about Rs 150 crore to the Exchequer towards excise duty (net of Cenvat credit).

Biscuit manufacturers have been looking for tax relief on excise duty and the VAT front on account of their inability to pass on the rising input costs to the price-sensitive consumers of LPHN biscuits.

The LPHN category accounts for about 74 per cent of the biscuits consumed in the country.

(This article was published in the Business Line print edition dated May 20, 2006)
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