Indirect Taxes (Central Excise and Customs) - Relaxation announced by the Finance Minister in the Lok Sabha while replying to the debate on Finance Bill, 2010

Indirect Taxes

            I shall now take up specific issues. Hon'ble Members would recall that I had proposed an increase in excise duty on almost all tobacco products including cigars and cheroots. I have received a large number of representations on behalf of the manufactures of 'hand-rolled cheroots' - an industry located primarily in the cottage and household sector. Considering the nature of this labour-intensive industry, I now propose to reduce the excise duty on hand-rolled cheroots priced upto Rs.3 per stick to 10% ad valorem. Similarly, the additional excise duty on this product shall now be 1.6% ad valorem.

            Full exemption from excise duty has been provided to betel nut product commonly known as 'supari'. This exemption is now being extended to scented supari.

            Central excise duty on corrugated boxes and cartons was reduced from 8% to 4% when they are manufactured starting from kraft paper. I propose to extend the exemption to cover units that manufacture such cartons from corrugated paper or paperboard also.

            Paper and paperboard manufactured from non-conventional raw material such as waste paper attract a concessional excise duty of 4% subject to certain conditions. Waste paper is chargeable to an excise duty of CVD of 10%. Domestic industry has represented that this creates an inversion leading to the accumulation of Cenvat credit. I propose to reduce the excise duty on waste paper to 4% to rectify this anomaly.

            As the Hon'ble Members are aware, the excise exemption for small scale units is not available to goods that bear the brand name of another person.  A relaxation of this condition is available in respect of specified packing materials which are normally not sold under the brand name that they bear.   In order to resolve disputes about the coverage of this relaxation, I propose to extend it to all  types of packing material. 

            Automobile components have been subjected to excise duty on the basis of their retail sale price. In order to resolve disputes about the coverage of this provision, it was amended so as to make it applicable to parts, components and assemblies of vehicles of Chapter 87 of the Excise Tariff. Since these components are also used for earthmoving machinery like loaders, excavators etc., I now propose to apply this provision to the parts, components and assemblies of such machinery as well.

            Tunnel boring machines are critical for hydroelectric projects. Since these are not produced domestically, full exemption from customs duty was provided in this budget. It has been represented that owing to their huge size these machines are incapable of import in a single consignment. Considering this practical difficulty the exemption is being extended to parts and components of tunnel boring machines.

            Hon'ble Members would recall that the customs duty regime on medical equipment was rationalized in this budget by prescribing a uniform basis duty of 5% and CVD of 4%. In doing so listed exemptions were dispensed with. I have received a number of representations in respect of Ostomy appliances in whose case a concession has been removed. Considering that these are mainly used by cancer patients, I propose to provide this concession to such appliances.

            Basic customs duty on 11 specified drugs including two anti-cancer and one for the treatment of AIDS is being reduced to 5%. These drugs are also being exempted from CVD by way of excise duty exemption.

            'Optical Disc Drives' (ODD) are ITA-bound and thus permissible for import without payment of duty. I propose to fully exempt specified parts or compo9nents required for the manufacture of ODD from basic customs duty.

            Cigarette filter rods are manufactured from acetate rayon tow. While full CVD of 10% and special CVD of 4% is applicable to tow, the excise duty on filter rods is 10% creating an inversion in duty. I propose to fully exempt acetate rayon tow from special CVD of 4%.

            Flax fibre and yarn are not produced in India in significant quantities. I propose to fully exempt them from basic customs duty in order to encourage domestic value addition.

            As the House is aware, an export duty at the statutory rate of Rs.2500 per metric tonne (PMT) was imposed on raw cotton with effect from 9^th April, 2010 in order to contain the spiraling prices by disincentivizing exports. The Government has been keenly watching the quantum of exports well as the price situation. In order to meet any future exigency, the statutory rate for this item is being enhanced to Rs.10,000 PMT while maintaining the effective rate at the current level. For this purpose, an official amendment to the Finance Bill, 2010 is being moved.

            Except in the case of export duty on raw cotton, the changes in the customs and excise duties would come into force with immediate effect. The notifications in this respect are being issued today.

            In December, 2009 the export duty on iron ore lumps was enhanced from 5% to 10% and on fines from Nil to 5%. Keeping in view the trend in the quantum of exports and domestic and international prices, the duty on iron ore lumps is being increased further to 15%.

            In response to representations from the domestic producers of stainless steel, I propose to reduce basic customs duty on stainless steel melting scrap from 5% to 2.5%.