The Cement Manufacturers Association (CMA) has submitted its pre-budget memorandum 2011-12 to the Finance Ministry. The cement industry urged the Finance Ministry to bring the value-added tax (VAT) on cement on par with other building materials like steel and scrap import duty on coal, pet coke, gypsum and other fuels. The memorandum also stated that while steel attracts 4 per cent VAT, for cement it is as high as 12.5 per cent and argued 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 input for infrastructure, 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. Levies and taxes on cement 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.
The industry also expects to be granted "declared goods" status like steel, which would enable the sector to reduce expenditure on taxes. The industry was also concerned with high cost of manufacturing. Currently only 50-55 per cent of the coal requirement of the cement industry is supplied through linkage. The balance requirement of fuel has to be procured from open market/e-auction, import of coal and use of alternative fuel pet coke, all at considerably higher cost than linked coal, thus adding to the cost of manufacturing of cement.