Airconditioning Industry asks for maintaining CENVAT at 8%

Refrigeration and Airconditioning Manufacturers’ Association (RAMA) recently submitted its Pre-budget memorandum to the Finance Ministry with its list of issues facing the industry that it wants to get addressed in the forthcoming budget.

RAMA has strongly represented that CENVAT on airconditioners and key components should be retained at 8%, since the growth and profitability of the airconditioning industry has been adversely affected due to the economic recession and global meltdown.

The other requirements that RAMA have highlighted include varying abatement rates on star-rated products to encourage enhanced sales of higher star-rated products; reduction in the composite rate of service tax on erection, installation and commissioning; and collection of service tax on 70% of any AMC with material and labour components, rather than the full AMC value.

Further, RAMA has also sought an exemption on import duty on raw materials and components for products based on non ODS (Ozone Depleting Substances) technologies. Currently, production costs for the eco-friendly non ODS technologies are high due to the high cost of components such as compressors and raw materials such as refrigerant and copper tubes, and the exemption will encourage the manufacturing of eco-friendly technologies.

In addition, RAMA has sought exemption of customs duty on components and raw materials used in manufacturing airconditioners. While, fully assembled airconditioners attract no duty under the Thailand FTA, components and raw materials attract full duty. RAMA’s contention is that the current structure discourages local manufacturing and value addition since it is cheaper to import the full product.

RAMA has also sought that the additional customs duty which is currently at 4% to be reduced to the CST figure of 2%. Further it wants the additional customs duty to be allowed as a set-off against payment of CST, when the goods are sold locally, rather than a cumbersome refund process of the same.

In the SEZ arena, only direct suppliers of goods to SEZs enjoy tax exemption, and resellers such as contractors have to incur VAT or CST on the products sold by them. RAMA has requested to amend the current practice so that suppliers don’t pay tax on inter-state purchases of goods meant for resale to SEZ units.

According to Mr S K Sinha, President, RAMA, “We are confident that the Finance Ministry will look into our concerns and address our issues in the forthcoming budget. The industry has been contributing a significant amount to the exchequer and the resolution of these issues will help the industry continue its fast-growth trajectory”