Excise On Soft Drinks To Be Based On Mrp

Excise duty on soft drinks and soda water will be levied on the basis of the maximum retail price (MRP) declared on aerated water bottles and containers with effect from September 1. A government statement yesterday said the duty will be chargeable on 50 per cent of the maximum retail price. In other words, if the MRP is Rs 100, the excise rate will be levied on a Rs 50 value.

The governments announcement comes on the heels of its move to extend the MRP provisions to cosmetics, toilet preparations, paints and varnishes and footwear.

The finance ministry has now covered almost all the consumer goods on which the government has reportedly been losing revenue because of high mark-ups by manufacturers.

The excise structure for aerated water has essentially gone through four stages. Prior to 1994, it was levied as specific duties. Thereafter, it was shifted to ad valorem rates.

A series of raids on soft drink manufacturers revealed that many companies were resorting to under-valuation. Accordingly, it was decided to introduce tariff values an estimate the government makes for commodities which are difficult to assess in November 1995. The cycle has now been completed with the shift to MRP as the basis for levying excise.

At present, the tariff values are applied on a four-slab structure. The slabs are for bottles less than 200 ml, more than 200 ml but less than 300 ml, more than 300 ml but less than 500 ml and more than 500 ml but less than 1,000 ml. Excise is levied on the basis of the declared assessable value on bottles above 1,000 ml.

Another round of raids by the revenue departments anti-evasion wing on soft drink manufacturers, including multinationals, revealed that many companies included a high mark-up. Hence, the MRP was often considerably higher than the factory price. Therefore, the excise department recommended that soft drinks too should be brought under MRP, like other consumer goods.