Excise structure on cement changed

03 May 2007

New Delhi: The government today announced a new excise structure that could result in marginal reduction in the price of cement, since cement manufacturers have flatly refused to cut their prices.

Under the new system, while the concessional duty of Rs350 per tonne on cement priced below Rs190 per bag would continue, the commodity sold above it would attract ad-valorem duty of 12 per cent on retail selling price instead of the flat Rs600 per tonne announced in the Union Budget, against Rs400 earlier.

Finance minister P Chidambaram said during the debate on Finance Bill 2007-08 in the Lok Sabha today that after this 12 per cent duty, the effective reduction in the tax burden on cement sold above Rs190 per bag would be up to Rs7.

The move was intended to contain inflation. However, it backfired as cement manufacturers immediately hiked prices saying that they could not absorb the additional duty and refused to heed the finance minister''s plea to find a way to reduce prices.

Against high demand from the booming construction and real estate sectors, the industry is operating at full capacity.