The annual budget is around the corner and North Block is abuzz with the budget preparations.
The moot question at this time of the year is, “Would there be any major change in the tax set up?”Though the answer, especially from a customs and central excise perspective, appears to be in negative, following possible changes are relevant to the India Inc and all stakeholders.
With the rate of goods, under the proposed GST, already aligned with the peak rate of central excise duty at 10% for goods, the central excise duty rate on manufactured goods may not change.
However, the rates of customs duty on many inputs continue to be higher than that of the finished goods. The rate of duties on industrial inputs and raw materials should be reduced to correct the inverted duty structure, as also to encourage value addition within the country.
The inverted duty structure on pharmaceutical formulations / drugs has resulted in accumulation of Cenvat credit for the manufacturers.
Similarly, the additional duty of customs at 4% paid on imported inputs has also accumulated, to the extent that the same cannot be utilised for payment of finished excise duty on domestic clearances.
The budget should evolve a refund mechanism to enable availing excess Cenvat credit in such cases.
Alternatively, one suggestion could be to exempt the levy of additional duty on such imported goods. This will definitely add cheer to the manufacturing industry.
Excise duty exemption is available on equipments procured for setting up mega power plants.
However, similar benefit has not been extended to the non-mega power plants. It is suggested that excise duty exemption should also be extended to goods supplied to non-mega power plants, to help the domestic industry get a level playing field to compete with foreign suppliers.
However, recently a committee, constituted by the government to examine the disadvantages suffered by the domestic industry on account of this difference in benefits, has recommended that the import duties for mega power projects should be brought on par with non-mega power projects by way of levy of applicable custom duties.
Therefore, it is possible that the government could withdraw the benefits available on import of power plant equipments of mega power projects.
Presently, there are two tracer molecules, namely Technitium -99M and Radioisotope TI 201, which enjoy exemption from payment of excise duty/ similar duty on import as the same are used in medical imaging, which is very relevant for diagnosis of patients.
However, manufacturers engaged in other fluorine-based radiopharmaceuticals do not enjoy this exemption.
It is suggested that the budget would correct this anomaly and make medical diagnosis cheaper and affordable to the common man.
A recent clarification by the department regarding continued exemption to existing industrial units in Uttarakhand and Himachal Pradesh has been welcomed by the industry.
It was clarified that the central excise law does not bar any addition/modification to the existing plant or machinery or on the production of new products after March 31, 2010 and accordingly the excise duty exemption would be available to industrial units even after undertaking changes in the existing set up.
In order to ensure that this beneficial circular does not attract avoidable litigation going forward, it is suggested that the corresponding central excise notifications are amended to legalise the above intention of the government.
As per existing provisions under the central excise and customs law, the stay orders granted by the Tribunal requires to be renewed after every 180 days, till final disposal of the appeal.
Apart from clogging the Tribunal, this process also leads to unnecessary harassment for the trade.It is suggested that the relevant sections be amended to make the stay order absolute till disposal of the appeal.
Also the requirement of pre-deposit of duty and interest for hearing appeals by the Commissioner (Appeals) should be done away with in this budget. This measure would be beneficial to the trade.
The Legal Metrology Act 2009 is to be notified shortly and this law would replace the three decade old Standard Weights and Measures Act, 1976.
This change would require to be made effective to central excise law by making relevant amendments in the maximum retail price (MRP) related notifications.
Hopefully these changes should not have any significant impact on assessees presently paying central excise duty on the basis of retail price mentioned on the packages.
With GST roll out missing its deadline of April 2011 rollout, it is suggested that Central Sales tax (CST) on inter-state sale of goods be reduced from 2% to 1%.
And before signing off: A suggestion that could be beneficial for all of us who travel abroad for business or personal purposes.
The duty-free allowance of Rs25,000 as per baggage rules has remained unchanged for a number of years.
The government should consider revising this allowance limit for benefit of the travelling community.Hope the finance minister plays Santa and accedes to the wish list.
Heetesh Veera is tax partner, Ernst & Young. Suresh Nair, senior indirect tax professiona, with E&Y, has also contributed to this article. Views are personal.
The moot question at this time of the year is, “Would there be any major change in the tax set up?”Though the answer, especially from a customs and central excise perspective, appears to be in negative, following possible changes are relevant to the India Inc and all stakeholders.
With the rate of goods, under the proposed GST, already aligned with the peak rate of central excise duty at 10% for goods, the central excise duty rate on manufactured goods may not change.
However, the rates of customs duty on many inputs continue to be higher than that of the finished goods. The rate of duties on industrial inputs and raw materials should be reduced to correct the inverted duty structure, as also to encourage value addition within the country.
The inverted duty structure on pharmaceutical formulations / drugs has resulted in accumulation of Cenvat credit for the manufacturers.
Similarly, the additional duty of customs at 4% paid on imported inputs has also accumulated, to the extent that the same cannot be utilised for payment of finished excise duty on domestic clearances.
The budget should evolve a refund mechanism to enable availing excess Cenvat credit in such cases.
Alternatively, one suggestion could be to exempt the levy of additional duty on such imported goods. This will definitely add cheer to the manufacturing industry.
Excise duty exemption is available on equipments procured for setting up mega power plants.
However, similar benefit has not been extended to the non-mega power plants. It is suggested that excise duty exemption should also be extended to goods supplied to non-mega power plants, to help the domestic industry get a level playing field to compete with foreign suppliers.
However, recently a committee, constituted by the government to examine the disadvantages suffered by the domestic industry on account of this difference in benefits, has recommended that the import duties for mega power projects should be brought on par with non-mega power projects by way of levy of applicable custom duties.
Therefore, it is possible that the government could withdraw the benefits available on import of power plant equipments of mega power projects.
Presently, there are two tracer molecules, namely Technitium -99M and Radioisotope TI 201, which enjoy exemption from payment of excise duty/ similar duty on import as the same are used in medical imaging, which is very relevant for diagnosis of patients.
However, manufacturers engaged in other fluorine-based radiopharmaceuticals do not enjoy this exemption.
It is suggested that the budget would correct this anomaly and make medical diagnosis cheaper and affordable to the common man.
A recent clarification by the department regarding continued exemption to existing industrial units in Uttarakhand and Himachal Pradesh has been welcomed by the industry.
It was clarified that the central excise law does not bar any addition/modification to the existing plant or machinery or on the production of new products after March 31, 2010 and accordingly the excise duty exemption would be available to industrial units even after undertaking changes in the existing set up.
In order to ensure that this beneficial circular does not attract avoidable litigation going forward, it is suggested that the corresponding central excise notifications are amended to legalise the above intention of the government.
As per existing provisions under the central excise and customs law, the stay orders granted by the Tribunal requires to be renewed after every 180 days, till final disposal of the appeal.
Apart from clogging the Tribunal, this process also leads to unnecessary harassment for the trade.It is suggested that the relevant sections be amended to make the stay order absolute till disposal of the appeal.
Also the requirement of pre-deposit of duty and interest for hearing appeals by the Commissioner (Appeals) should be done away with in this budget. This measure would be beneficial to the trade.
The Legal Metrology Act 2009 is to be notified shortly and this law would replace the three decade old Standard Weights and Measures Act, 1976.
This change would require to be made effective to central excise law by making relevant amendments in the maximum retail price (MRP) related notifications.
Hopefully these changes should not have any significant impact on assessees presently paying central excise duty on the basis of retail price mentioned on the packages.
With GST roll out missing its deadline of April 2011 rollout, it is suggested that Central Sales tax (CST) on inter-state sale of goods be reduced from 2% to 1%.
And before signing off: A suggestion that could be beneficial for all of us who travel abroad for business or personal purposes.
The duty-free allowance of Rs25,000 as per baggage rules has remained unchanged for a number of years.
The government should consider revising this allowance limit for benefit of the travelling community.Hope the finance minister plays Santa and accedes to the wish list.
Heetesh Veera is tax partner, Ernst & Young. Suresh Nair, senior indirect tax professiona, with E&Y, has also contributed to this article. Views are personal.
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