Cement industry wants reduction of VAT

The cement industry today said that the government should bring the value added tax (VAT) on cement at par with other building materials like steel in the Budget and scrap import duty on coal, gypsum and other fuels.

"There are some lingering discriminations in respect of cement compared to other building materials. This includes equalising the rate of VAT on cement to that on steel and other building materials," ACC Ltd Managing Director Sumit Banerjee told PTI.

While steel attracts four per cent VAT, for cement it is as high as 12.5 per cent. Industry players argue that since both the materials are used for construction, cement should be given a level-playing field to that of steel.

"Though cement is the most essential infrastructure input, the tax on cement is the highest among the items required for building infrastructure. The total government levies and taxes on cement constitute 60 per cent or more of the ex-factory price," Ficci said in a pre-Budget memorandum to the Finance Minister Pranab Mukherjee.

Levies and taxes on cement in India are far higher than most of the other countries in the Asia-Pacific Region where the average tax is just 11.4 per cent, with the highest levy of 20 per cent being in Sri Lanka.

Banerjee added that the import duty on coal, gypsum and other fuels should be removed and customs be levied on cement imports to India.

Echoing the Banerjee's views, Dalmia Cement (Bharat) Managing Director Puneet Dalmia said that the industry expects to be granted "declared goods" status like steel, which would enable the sector to reduce expenditure on taxes.

The cement industry is also facing a surplus-capacity situation now. As there is hardly any impact on inflation (weight of cement in WPI is 1.7 per cent), lifting the export ban would encourage investment in new capacities.

"India's cement industry will otherwise loose out the opportunity in the Middle East to other countries like Pakistan," Dalmia said.

"To promote export of cement and clinker, export incentive in the form of Duty Entitlement Pass Book (DEPB) be enhanced, as also DEPB benefit extended to clinker exports," the industry said.

"India lags way behind globally in per capita consumption of cement. The can be bridged by building more infrastructure and public utilities which are badly needed, and which only the government can do," Banerjee said.