Business

Duty reliefs to drive consumer demand

NEW DELHI: By proposing a reduction in the general central value added tax (CENVAT) rate on all goods in his budget 2008-09, Finance Minister P. Chidambaram has not only given the manufacturing sector a reason to smile, but has also taken care of consumers’ need who will now get cheaper cars and two-wheelers, packaged foods, medicines and some electronic items.

The biggest gainer could be the auto industry where the excise duty on small cars, two-wheelers, passenger three-wheelers and buses has been reduced from 16 per to 12 per cent, while in the case of hybrid cars, the excise duty has been reduced from 24 per cent to 12 per cent and for electric cars from eight per cent to nil.

Another major beneficiary has been the drugs and pharmaceuticals industry where the excise duty has been reduced from 16 per cent to 8 per cent on all drugs (formulations), dressing pads, some surgical items and first-aid boxes and kits. The excise duty on anti-AIDS drug Atazanavir and bulk drugs for its manufacturer has been completely removed.

People would get cheaper breakfast items and other food materials. While the excise duty on packaged tender coconut water, puffed rise, milk containing edible nuts and tea-coffee pre-mixes have been fully exempted, it has been reduced from 16 per cent to 8 per cent on muesli, corn flakes and similar breakfast cereals, ‘sharbats’, and on some packaging material. Total exemption has also been given on specified refrigeration equipment for the installing of a cold storage, cold room or refrigerated vehicle, on end-use basis.

To boost the growth of the information technology and communication sector, the Finance Minister has fully exempted the excise duty on wireless data modem cards, including the imported cards, while the duty has been reduced on some convergence products.

However, the excise duty has been increased from 8 per cent to 12 per cent on packaged software.

For the agriculture sector, the Finance Minister announced a reduction in excise duty on agriculture related items, which include a duty cut from 30 per cent to 20 per cent on vitamin premixes and mineral mixtures that will reduce the cost of manufacture of cattle and poultry feeds. The duty on phosphoric acid has been reduced from 7.5 to 5 per cent, while the duty on bactofuges has been made nil, which will benefit the dairy industry.

Mr. Chidambaram has also given relief to the paper and packaging industry by cutting the excise duty on various items. Similarly, the excise duty has been reduced on water purification devices, veneers and flush doors, composting machines and pan masala (not containing tobacco). However, duty on non-filter cigarettes has been enhanced.

To limit revenue loss on sale of petrol and diesel, Mr. Chidambaram has proposed to levy specific excise duty on un-branded auto fuels, but this will not translate into a price cut as the rates fixed are on a par with current levies. The move to convert ‘ad valorem plus specific rate’ on petrol and diesel sold without a brand name to pure ’specific rate’ would, however, help retailers limit their revenue losses in future as the cascading effect of duties in the event of price rise has been checked.

On the customs duty front, Mr. Chidambaram has announced some sector-specific sops. The sectors include chemicals and petrochemicals industry, daily and poultry, IT and electronic industry, export-oriented industry and metals.

While no change has been effected in the peak rate of customs duty, it has been reduced from 7.5 per cent to 5 per cent on project imports. However, a special countervailing duty (CVD) of 4 per cent would be imposed on some specified projects in the power sector. The duty on steel melting scrap and aluminium scrap has been reduced to nil from 5 per cent.

The Finance Minister also cut customs duty on specified parts of set-top-boxes, convergence products, specified machinery and raw materials for sports goods and certain raw materials for gems and jewellery and certain cattle feeds.

Customs duty on certain specified life saving drugs has been brought down from 10 per cent to 5 per cent. Bulk drugs used for manufacture of such drugs have been totally exempted from customs duty or CVD.

To conserve chrome ore and make it available for value added manufacture in India, the export duty on this item has been raised to Rs. 3,000 a tonne from Rs. 2,000 a tonne, while the custom duty on crude and unrefined sulphur has been reduced from 5 per cent to 2 per cent to support domestic fertilizer production.

© Copyright 2000 - 2009 The Hindu