Proposed Excise Levy May Hit Hll, P & G
The department of revenue says that 60-70 per cent of the maximum retail price (MRP) of detergents should constitute the assessable value for excise duty. If this is accepted, the excise liabilities of most of the prominent companies in the sector like Hindustan Lever, Procter & Gamble and the Karsanbhai group will shoot up sharply.
However, the rate will be finalised only after taking into account the views of the industry, which made a presentation before the department yesterday and submitted data regarding the cost of manufacturing and pricing of various products.
The department is also conducting its own inquiries to collect the figures.
The levy of excise duty on MRP which is likely to come into force in the case of detergents by the end of this month is designed to tap the unaccounted-for portion of the differential between the ex-factory price and the maximum retail price of all the commodities covered under the Weights & Measures Act.
Although the rate of excise duty will remain unchanged at 18 per cent, the levy on 60-70 per cent of the MRP will push up the assessable value of Hindustan Levers Surf (1kg pack) from Rs 25 to Rs 41.40-48.30. Of the other brands of the company, the assessable value of Rin Powerwhite (500gm) will climb from Rs 12.25 to Rs 19.80-23.10, and that of Wheel (1kg pack) from Rs 7.50 to Rs 9.75-11.37.
The assessable value of P&Gs Ariel Microshine will rise from Rs 26.50 to Rs 35.40-41.30 on a 500 gm pack. The Karsanbhai group, which is said to give a large margin to retailers and whole-sellers, will also be hit, with the assessable value of Nirma (yellow) rising from Rs 9.15 to Rs 10.2-11.9 on a 1 kg pack.
Many detergent companies, especially multinationals, assign the task of manufacturing to small-scale units (referred to as job workers) whose cost of production works out to be very low. Even after factoring in the margins, freight, sales tax, excise, octroi, etc, a large portion remains uncovered, said sources.
Excise cannot be levied on the cost incurred by multinationals in placing a product in the market including expenses on marketing, advertising, distribution etc because the courts have held that in such cases job workers are the actual manufacturers, say sources.
This leads to different amounts of excise duty on similar products manufactured by different companies.
This is an anomaly and needs to be rectified. Rationalisation of excise levy is also essential to boost the revenue collections, said sources.