Duty rates on cement are one of the highest and next only to luxury goods such as cars. Right now, companies are not wasting time in passing on their margin pressure burden to customers. The excise hike to 12% will see cement prices by Rs 5 per bag.
Here is what Pranab Mukherjee delivered for the cement sector.
Excise duty: The hike will not have a major impact as it was on expected lines and is expected to be passed on by manufacturers to the end consumer.
What was expected: The industry wanted a reduction in excise duty. Industry analysts were bang on in estimating a 2 % excise duty increase in the Budget. Right now, central excise and state VAT is about 25%. Add income tax – that’s another 33% of revenue which goes to the government.
Import duty: The government did not abolish this, sending a negative signal for the sector.
What was expected: Currently there is a 5% and 2.5% import duty charge on raw materials like thermal coke and PET coke.
Customs duty on import of cement: There was no imposition of a basic customs duty on cement imports which is already grappling with low utilisation levels.
What was expected: The imposition of a basic customs duty on cement imports augurs well for the sector which has been grappling with low utilisation levels. There was an urgent demand for the duty structure to be simplified to be either on specific rate per million tonne or on ad-valorem basis and without relating to MRP.
Packaged cement, whether manufactured by mini-cement plants or others, attracts differential excise duty depending on the retail sale price per bag. It proposed to prescribe a unified rate of 12% plus Rs 120 PMT for non-mini cement plants and 6% plus Rs 120 PMT for mini-cement plants. It was also proposed to charge this duty on the retail sale price less abatement of 30%.