What were the regulatory changes (various duties) within the cement sector in 2009? What is the current duty structure? The major regulatory change the cement industry experienced in 2009 was the one pertaining to the reduction in the excise duty consequent to announcement of the stimulus package. The other two notable changes have been the change in the classification of cement when they moved it from class 140 to 150 resulting in railway freight going up in January 2009 by about 8% for cement. The other change is the increase in royalty on limestone which has gone up to Rs. 64/- per MT from Rs. 46/-. This has resulted in further load on cement which is already very heavily burdened due to high tax structure. Besides the above, some of the states have increased the rate of VAT. In UP this VAT has gone up to 14% as against 12.5% earlier. It would not be out of place to mention that the Empowerment Committee headed by Shri Asim Dasgupta had recommended an uniform VAT rate of 12.5% on cement which already was much higher than the earlier sales tax in most of the states. Steel, one of the other main construction material, was put in the bracket of 4% VAT. Some of the states have now started tinkering even with the already high VAT rate and states like Gujarat, Rajasthan and UP have increased it to 14 to 15%. Presently the excise duty is based on MRP. The excise duty rate on cement at pre-stimulus package was 12.36%. In case of those products where excise duty is charged on MRP, normally abatement is provided to cover the post manufacturing expenses. Even in case of white cement an abatement of 35% is provided. NCAER had recommended an abatement of 55% on grey cement. Unfortunately at present no abatement is being given on excise duty though being charged on MRP in case of cement. What are the cement industry’s expectations from the budget 2009-10? The cement industry’s expectations basically relate to rationalization of its high tax structure. Thanks to the competitiveness of Indian cement industry that despite its high taxation which constitutes over 60% of the ex-factory realization, the cement is still sold as one of the cheapest commodity in the market, at about Rs. 4.50 per kg. Some of the major suggestions which have been submitted to the government are as follows: · Abatement of 55% on excise duty as recommended by NCAER· Alignment of VAT in line with steel. VAT on cement is pegged at 12.5% (some States have increased to 14-15%) while VAT on steel is 4%· Existing Excise Duty structure on cement is complicated with a combination of fixed and ad valorem duties. It should be converted to uniform rate.· Import duty on cement is zero while import duty on inputs like coal, petcoke, gypsum is 5%. Industry has requested that import duty on inputs should be same as the import duty on finished product, viz. cement.· Royalty on limestone is very high. It should be allowed as either CENVAT credit or VAT credit. So also duties/cess levied on indigenous coal. Besides above measures the Industry needs to be insulated from the vagaries of cyclicity of demand so that the Industry retains its attractiveness for huge investments required to achieve desired growth in the Infrastructure sector. Concretization of roads can largely serve this purpose. Besides showcasing the infrastructure progress of the country, the concrete roads will also help save 14% of the fuel being guzzled by the commercial vehicles in the country.
Ms Vinita Singhania, President, Cement Manufacturers Association and MD JK Lakshmi Cement
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