Calcutta, Jan. 17: The Indian Paint Association will demand more rebate on excise duty for manufacturers in its pre-budget memorandum to finance minister P. Chidambaram.
Paints manufacturers now pay excise duty at the rate of 16 per cent on 60 per cent of their maximum retail price (MRP). “Paints are considered to be finished products like other fast moving consumer goods. But while FMCG companies pay excise duty on 50 per cent of their MRP, it is 60 per cent for paints manufacturers. We will seek a level-playing field and suggest that the abatement for paints manufacturers be increased to 50 per cent from the current level of 40 per cent,” said Ashish Dutta, a member of the IPA and senior vice-president (finance and accounts), Berger Paints India.
According to Dutta, the IPA has prepared its charter of demand and will give it to the finance minister after its 23rd bi-annual conference in the city on January 19 and 20.
If the finance ministry increases the abatement (on MRP) for excise duty, it would translate into a 1.6 per cent savings towards excise outgo for the paints manufacturers. “For example, if the MRP of a paints pack is Rs 100, its manufacturer at present pays the excise duty on Rs 60 at the rate of 16 per cent, or Rs 9.60. If the abatement is raised to 50 per cent, the manufacturer will pay an excise duty of Rs 8 (at 16 per cent on Rs 50). The savings of Rs 1.60 towards excise payment can easily be passed on to customers,” said Subir Bose, managing director of Berger Paints India.
However, the association’s demand to increase the duty rebate has more to do with trade-related competition than customers’ interest. Domestic paints manufacturers are feeling threatened by their counterparts both in China and in the Asean countries who could be allowed to sell their products in India under the proposed free trade agreement. “Paints manufacturers in those countries not only get their raw materials at cheaper rates than us, they also pay a lower excise duty of 10 per cent. The FTAs are a real threat to us,” said Bose.
The association will also suggest to the finance minister to treat the imported raw materials for paints manufacturing as basic products and thereby reduce the import duty on these products.