Indian Chemical Council seeks no further cuts in peak custom duty in Budget2008-09

Indian Chemical Council (ICC), in its pre-budget memorandum to the Union Finance Minister, requested no further reduction should be made in respect of peak custom duty for chemical industry, as in 2007-08 Budgets, chemical and plastics were specifically singled out to reduce duty of 7.5% as against 10% for others, which is equivalent to Asean duty levels. Other demands of ICC were listed below:

> Duty on building blocks be reduced from 5% to 1% on Benzene, Toluene, Orthoxylene, Paraxylene, Metaxylene, Mixed Xylene, Cumene, Denatured Ethyl Alcohol, Ethylene, Propylene, Iso Butylene, Hexene, Propylene Oligomers(Propylene Trimer/ Tetramer), Styrene, Ethyl Benzene and Ethylene Dichloride, the ICC said.> Import Duty on all kinds of fuels like Furnace Oil, LSHS, Naphtha, HSD, non-coking Coal, LNG, Kerosene etc. should be reduced from current level of 10% to 1% level.

> Anomaly due to Inverted Duty Structure: In several cases it is noticed that duty on raw material is higher than the finished goods, such anomalies need to be corrected. Such cases are covered under Product Specific Recommendations.

> Import duty on capital goods including capital goods used for small and medium power projects, machinery used for de-bottlenecking / revamping capacities should be reduced from 10% to 5% level.

> Import Duty on capital goods for R&D activities should be nil in order to give boost to R&D activities in the country.

Local Duties: VAT and CST:

CST: In Union Budget for the year 2007-08, CST was reduced from 4% to 3%. However, there appears no firm indication that it will be gradually reduced at least by 1% every year enabling it to be phased out by 2010. In the forthcoming Union Budget for the year 2008-09, CST should be reduced by minimum 1% if not by 2%.

VAT: It is recommended that all local levies by Central and State Governments such as Electricity Duty, Consumption Tax, Octroi, Turnover Tax, and Cess hold be ‘vat able’. This will give some relief to the negative impact of Rupee Appreciation.VAT:
Local levies on all inputs for Captive Power Generation (like fuels and lubricants) should be ‘vatable’/ refundable.

> Against Advance Intermediate License, currently CST for interstate purchaseis not ‘vatable’ / refundable. Hence, this has become additional cost when material is locally purchased for processing goods for exports. It is recommended that this component of CST should be made refundable or should effectively not be charged.

EXCISE DUTY:
> Presently there is central excise duty of Rs 750 per MT on molasses which works out to 30% to 50% advaloremwhereas on Industrial Alcohol, the central excise duty is 16% advalorem.
Therefore, CENVAT credit attributable to inputs, input services and capital goods for manufacture of Industrial Alcohol is higher than the duty payable on Industrial Alcohol and results in accumulation of CENVAT credit with the distilleries.

Consequently, the manufacturers of Industrial Alcohol have tendency to recover the unutilised credit from the buyer by including such amount in the price of the product which ultimately becomes input cost in manufacture of chemicals. Further, such manufacturers do not supply industrial alcohol for export production without payment of duty.

Therefore, it is suggested that central excise duty on molasses should be @ 16% advaloremor to be reduced to Rs 300 per ton.