Keeping in view the forthcoming Union Budget 2012-13, the Cement Manufacturers’ Association (CMA) has submitted a wish list of suggestions and demands to Finance Minister Pranab Mukherjee in order to ensure the profitability and competitiveness of the Indian cement Industry. Indian Cement Review takes a look at some of the important demands made by CMAFinance Minister Pranab Mukherjee will be presenting the Union Budget on March 15, 2012. The financial year 2011-12 was marked by a depreciation of the rupee and a fall in industrial production in India. Though there was a marginal impact of the weak global economy on the Indian cement industry, it exhibited remarkable resilience and recorded a growth of 7.9 per cent in 2008-09, compared to the average of 9.7 per cent during the period 2005-08. The industry registered appreciable improvement in its performance during the year 2009-10 and posted a double digit growth of 12.7 per cent. However, withdrawal of stimulus packages resulted in slowdown of the economy and growth in cement industry has come down to 5 per centThough cement is the most essential infrastructure input, the tax on cement is the highest among the items required for building infrastructure. The levies and taxes on cement in India are far higher compared to those in countries of the Asia-Pacific region. Average tax on cement in the Asia-Pacific region is just 11.4 per cent with the highest levy of 20 per cent being in Sri Lanka. In this backdrop, the Cement Manufacturers’ Association has forwarded the following suggestions for the consideration of Finance Minister Pranab Mukherjee in order to help the cement industry sustain a healthy growth :Uniform and Specific rate of excise duty on cementTill Feb. 28, 2007, specific rate of excise duty was applicable on cement and thereafter upto Feb. 28, 2011, different rates of excise duty based on retail sale price were levied on cement. However in the Union Budget 2011-12, the excise duty rates on cement have been replaced with composite rates having an ad valorem and specific component. For the purpose of ad valorem component, the transaction value determined under section 4 of the Central Excise Act, 1944 is considered as value. The present rates of excise duty applicable for cement and clinker are as under.Cement meant for clearanceHaving retail sale price declared, not exceeding Rs190/- per bag of 50 kg or Rs.3800 per tonne of cement: 10 per cent ad-valorem+Rs80/- per tonneHaving retail sale price declared exceeding Rs190/- per bag of 50 kg or Rs 3800 per tonne of cement:10 per cent ad-valorem +Rs 160/- per tonneAs packed cement for industrial & institutional consumers & other than packed cement i.e loose cement 10 per cent ad-valoremClinker 10 per cent ad-valorem+ Rs 200/- per tonneThe excise duty on cement and cement clinker has become ad-valorem cum specific duty and is further also related to the declared MRP of the product. For example, if MRP of cement is more than Rs 190 per bag, then excise duty is 10 per cent ad-valorem+Rs160 per MT. These are causing a lot of avoidable confusions. To encourage cement industry and bring it at par with other core and infrastructure industries, it has been recommended that the excise duty rate be rationalized from 10 per cent to 6-8 per cent. In addition, the duty structure be simplified to be either on specific rate per MT or on ad-valorem basis and without relating to MRP etc.Customs Duty on Coal, Pet Coke, Gypsum and other inputsPet-coke and gypsum attracts 2.5 per cent duty and coal attracts 5 per cent duty, if imported while there is no duty on imported cement. This leads to an anomaly in that "Import duty on inputs is higher than the finished product." Therefore, the CMA has requested that government to scrap the import duty on coal, pet coke, gypsum and other fuels. The cement industry is heavily dependent on imported coal and pet coke due to short supply of indigenous coal.Levy of import duty on cement importsPresently, import of cement into India is freely allowed without paying basic customs duty. However, all the major inputs for manufacturing cement such as coal, limestone, gypsum, pet coke, packing bags etc attract customs duty. Because of this anomaly, duty free imports causes further hardships to the Indian cement industry. CMA has requested that to provide a level playing field, basic customs duty be levied on cement imports into India. Alternatively, it has requested that import duties on goods required for manufacture of cement be abolished and freely allowed without any levy of duty.Treatment of waste heat recovery as renewable energy sourceCement industry is putting up waste heat recovery plants so as to derive more energy from the same energy resource. In a way, this is akin to green energy. All of this requires further capital investments. To help the industry in its endeavor to produce more such environment friendly energy, CMA has requested that such energy generation be treated as renewable energy source.Abolition of import duty on tyre chips

The industry has been developing alternative energy sources like tyre chips etc. However, tyre-chips are presently put under the negative list of imports whereby the same cannot be imported into India. To increase supply of energy sources as well as for conserving the domestic energy sources, CMA has requested that tyre chips be allowed to be imported by removing it from the negative list by reducing import duty on the same to zero.Classifying cement as "Declared Goods"

CMA has requested that cement be stipulated as "Declared Goods" under section 14 of Central Sales Tax Act so that it is put on an equal footing with other core sector goods like coal, steel, crude oil, jute, cotton yarn etc.Goods & Service Tax (GST)Central Government has announced its intention to introduce GST w.e.f from 1.4.2012. The Association has given the following suggestions:a) Single rate of tax : Central Government has made proposal to state governments for dual rate under GST which would be brought to single rate over a period of three years. However, the Association has suggested that single rate may be introduced from the first year itself, so that all disputes/litigation towards classification can be avoided from first year itself.b) Common law & enforcement : The Empowered Committee of state finance ministers (EC) has agreed to introduce dual GST with separate Act for SGST to be levied by each state. CMA has sought uniformity in the law to be enacted by various states and process/procedures of different states are similar, as otherwise, the basic purpose behind introduction of GST would get defeated. It is suggested that change in statute of any state, after introduction of GST, be made with the concurrence of all states.c) Cenvat/Input tax credit : Input tax credit may be made available for all the inputs and capital goods in or in relation to manufacturing and business activities. No condition be imposed for availing Input tax credit as long as it relates to the business or industrial activity. Exclusion (negative list) for availing Input Tax Credit in respect of items used for or in relation to manufacture be abolished. Hundred per cent input tax credit be allowed on capital goods in the year of purchase itself and conditions like capitalization/put to use not to be imposed.d) Common Dispute resolution mechanism : To reap the full benefit of GST, it has been recommended by CMA that a common dispute resolution mechanism be applicable throughout all the states so that unnecessary litigation can be avoided and one common authority be established for all states for advance ruling.e) Continuance of Exemptions/Incentives: The association has requested that following the implementation of GST, various Central/state level exemption and incentives which are currently being enjoyed under the Excise/VAT laws be continued for the remaining unexpired period.Project importCMA has recommended that basic custom duty rate in case of project import be reduced from the current five per cent to three per cent, so that imports of capital goods for projects can be availed at concessional duty and accordingly project costs be reduced.Cement industry issues needing urgent attention1) Support required from government for promotion of cement/clinker exports : Benefits for cement/clinker exports such as Focus Product Scheme (FPS) are not allowed for cement industry. CMA has requested that FPS benefits be also allowed to the cement industry.2) Duty drawback benefits: The present duty drawback rates of 1% do not cover the import duty content of imported items used in manufacture and thus adversely affect exports. Hence in order to neutralize the incidence of import duties, CMA has suggested that duty drawback may kindly be enhanced to 3 %( existing DEPB rates) to sustain exports.3) Reduction of customs duty on imports under EPCG scheme: The association has suggested that the duty of 3 % on imports under EPCG scheme also be abolished to promote growth and investment. Recognizing this, the government has already reduced duty to 0% for certain sectors and the association has requested that this benefit be extended to cement industry as well.4) Exemption of plant, machinery and equipment from customs duty : In view of the fact that the initial cost for setting up solar power plants is relatively higher when compared to other sources of energy, CMA has requested that the import of plant, machinery, equipment etc be fully exempted from levy of custom duty.5) Royalty on limestone to be included as part of drawback: Royalty on limestone is one of the levies for which credit is not allowed at present. The association has requested that the element of royalty be included in the calculation of drawback rates. Alternatively, exemption from royalty on limestone be allowed on the cement/clinker manufacturing for export.Recommendations on Cenvat1) CMA has recommended that royalty paid on limestone as well as duty/cess paid on indigenous coal be allowed as credit- either as Cenvat Credit or VAT credit. It has also been urged to make suitable amendments or issue notification to state that Cenvat credit is eligible on all items used in relation to business activity if the same is liable to either excise duty or service tax. The Association has also requested that Cenvat credit be allowed on clean energy cess so as to mitigate the impact on costs. It has also been recommended that 100 per cent credit be allowed on capital goods in the first financial year itself. Considering the important role being placed by equipment like dumpers in the cement manufacturing process and that credit may be allowed on these equipments and suitable amendment be made in the rules to cover these equipments in the definition of "capital goods". CMA has also recommended that Cenvat be permitted on Light Diesel Oil (LDO).Disputes were being raised by the Excise Department as to whether Cenvat credit was allowed on duty free supplies made to SEZ units/developers/contractors. To dispel this, CBEC issued a notification no.50/2008-CE dated 31.12.2008. CMA has requested that it be expressly clarified by a circular that the said notification is clarificatory and hence has retrospective effect. In order to remove the ambiguity on Cenvat credit for service tax paid on outward transportation, CMA has recommended that proper explanation/clarification be provided in the relevant rules so as to allow credit of service tax on transportation of goods which is delivered at the buyers’ place from the factory/depot of the manufacturer.SHIS benefit for cementVarious industries are allowed benefit of Status Holder Incentive Scrip under the foreign trade policy. However, cement industry does not figure in the list of eligible industries. The Association has requested that the benefit of SHIS scrip be extended to cement industry.Service TaxCenvat credit on service used for civil work has been withdrawn w.e.f April 1, 2011. Hence, CMA has requested that credit may be allowed on service used in civil work for setting up of a factory.