India: CMA seeks fairer taxes for cement

The Indian Cement Manufacturers Association (CMA) has requested in its pre-budget memorandum 2014-15 that cement be stipulated as 'Declared Goods', so that it is put on an equal footing with other core sector goods like coal and steel in terms of taxation. At present, while the cement industry in India is one of the country's basic and core infrastructure industries, cement is subject to higher rates of taxation.

The CMA intends to rationalise and reduce the excise duty on cement from its current levy of 12 per cent + INR120/t  to 6-8 per cent without addition of specific duty. Further, CMA also suggested that the existing abatement (reduction in taxation level) of 30 per cent may be increased to 55 per cent.

Cement imports currently do not pay basic customs duty. However, all major raw materials and associated items for manufacturing cement such as limestone, gypsum, petcoke, packing bags, etc attract customs duty. In this situation, duty-free imports cause further undue hardship to the Indian cement industry apart from the security concerns inherent in the import of cement from Pakistan, according to the CMA.

As a result, the cement association has called for a level playing field where basic customs duty is levied on cement imports into India. Alternatively, import duties on goods required for manufacture of cement should be abolished and freely allowed without levy of duty.

The situation is particularly pressing in terms of fuel imports. In view of the reducing availability of coal, the cement industry has been resorting to increased usage of petcoke. Due to a shortage in local availability of petcoke, larger volumes of petcoke are imported. The CMA said that petcoke is expensive and the situation is further compounded a current import duty on petcoke of 2.5 per cent, whereas on final cement product there is no basic customs duty. Therefore, the CMA suggests that government scraps the import duty on petcoke.

The CMA also recommended the abolition of import duty on tyre chips. However, tyre chips are presently put under the "Negative list" of imports, whereby they cannot be imported into India. It is suggested that tyre chips be allowed in and with no import duty. This will result in dual benefit of increasing supply of this energy source as well as conserving domestic energy sources.