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Sub : Central Excise, Customs & Service Tax – Budget proposals for 2003-2004
Trade and industry is hereby informed that the Finance Minister has introduced the Finance Bill in the Lok Sabha on 28.2.2003. The salient features of the proposals regarding Excise & Service Tax are indicated as below -
(I) Central Excise 1. Rate Structure:
The general duty structure is proposed at 8%, 16% & 24%. Tobacco products, pan masala and petroleum products will continue to have different rates. For textiles, a separate package has been prescribed.
1.1 The Special Excise Duty (SED) on following items has been reduced from 16% to 8%.
1) Tyres 2) Aerated soft drinks 3) Polyester Filament yarns 4) Air Conditioners and components 5) Motor cars
The duty incidence on all these items will be 24% (16% Cenvat +8% SED) as against 32% earlier.
1.2 The 4% rate of excise duty without Cenvat has been abolished. Some of the items attracting this rate have been exempted from excise duty and rest have been taken to 7% rate. The 8% rate will now be with Cenvat Credit. As a consequence, the following items have been exempted from excise duty -
1) Bicycle and parts 2) Toys 3) Mosaic Tiles 4) Utensils and kitchen articles of metals 5) Knives, spoons and similar items of kitchenware/tableware 6) Unbranded surgical bandages 7) Article of wood 8) Imitation zari 9) Adhesive tape 10) Tubular knitted gas mantle fabric for use incandescent gas mantles 11) Umbrellas 12) Walking sticks, riding-crops and like 13) Article of mica 14) Kerosene pressure lanterns 15) Glasses for corrective spectacle lenses, flint buttons 16) Register, accounts book etc.
In addition, the following goods have also been exempted from excise duty:
1) Recorded audit CDs 2) Slag arising in the manufacture of iron and steel 3) Gold arising in the course of copper/Zinc smelting
1.3 The following items, which were earlier liable to duty at 4% without Cenvat or 16% with Cenvat, would now attract 8% excise duty with Cenvat credit: -
1) Light weight concrete building blocks. The 8% rate is being extended to aerated and cellular lightweight concrete blocks and slabs 2) Laboratory glassware 3) Crankshafts for sewing machines 4) Power driven pumps for handling water 5) Medical equipments 6) Pre fabricated buildings
1.4 Excise duty has been reduced from 16% to 8% with full Cenvat on the following items :-
1) Pressure cookers 2) Biscuits 3) Sugar confectionery (excluding white chocolate) not containing cocoa 4) Rough ophthalmic blanks 5) Dental chairs 6) Electric vehicles 7) Scented supari 8) Nicotine Polacrilex gum [Note Items attracting excise duty presently at 8% without Cenvat will attract duty at 8% with Cenvat]
1.5 New impositions Excise duty at the rate of 8% with Cenvat credit has been imposed on following items :-
1) Refined edible oils (branded and packed for retail sale0* 2) Vanaspati, bakery shortening, margarine and other similar edible preparations (branded and packed for retail sale)* 3) Lay flat tubing 4) Chemical reagents for specified end use 5) Wood free particles or fiberboard made from agro waste 6) Paper and paper board manufactured from at least 75% non-conventional raw materials (for the first clearances of 3500 MT per year) which were attracting Nil duty till now. 7) Populated printed circuit boards for black and white televisions * In respect of these products, labeling or re-labeling of containers and repacking or adoption of any treatment to render the goods marketable will a mount to manufacture.
1) Excise duty exemption on animal driven vehicle tyres has been withdrawn. Such tyres will attract duty @ 24%. 2) Coating of pipes and tubes of heading 73.04 or 73.05 with cement or polyethylene or other plastic materials has been declared as amounting to manufacture. 3) The facility given to integrated steel manufactures to pay excise duty on the factory gate price, even when their goods are sold from their depots is being withdrawn. The integrated steel manufacturers will pay excise duty on the normal transaction value at depots. 4) For starches falling under heading 11.03, labeling, re-labeling of containers and packing from bulk to retail packs or adoption of any other treatment to render the product marketable to the consumers has been declared as amounting to manufacture. 5) Excise duty on chassis of motor vehicles has been increased from 16% to 16% plus Rs,10000/- per chassis.
1.6 Cement Excise duty on cement has been increased from Rs. 350/ per metric tonne to Rs.400/ per metric tonne. Excise duty on cement cleared in bulk has been increased from Rs.332/ per metric tone to Rs.382/ per metric tone. Excise duty on Cement clinkers and on cement made by mini cement plants has been increased from Rs.200/ to Rs.250/ per metric tonne.
2. Textile
2.1 Major changes have been proposed in the duty structure applicable for textiles so as to remove a large number of exemption, withdraw deemed credit scheme and to complete Cenvat chain right from fibre/yarn to be garment stage. In brief, the following are the following are the important changes:
(a) Yarn: (1) 8% excise duty is being retained only for cotton yarn, not containing any other textile material. (2) 16% excise duty on fibres of polyesters, viscose, acrylic remain unchanged. (3) Uniform rate of 12% excise duty has been prescribed on polyester cotton, cotton viscose and all other spun yarns. Viscose cotton yarn will attract duty at 12% even if cotton predominates. (4) Excise duty on polyester filaments yarn has been reduced from 32% to 24%. (5) Excise duty on all other filament yarns (such as viscose / filament yarn, nylon filament yarn) has been reduced from 16% to 12%. (6) SSI exemption benefit has been withdrawn for shoddy and woolen yarn. This change will come into effect from 01.04.2003.
(b) Fabrics:
(1) Excise duty on all woven cotton, manmade and woolen fabrics has been reduced from 12% to 10%. (2) Duty of knitted/crocheted fabrics has been reduced from 12% to 8%. (3) Duty on non-cotton knitted/crocheted fabrics has been reduced from 12% to 16%. (4) All industrial fabrics including rubberized textile fabrics presently attracting duty rates of Nil, 21% and 16% and 16% plus specific rates will be changed to 16%. (5) Optional exemption on woven, crocheted or knitted fabrics is being withdrawn with effect from 01.04.2003. (6) Deemed credit scheme under which credit can be taken without production of duty paying documents is being withdrawn with effect from 01.04.2003. (7) The system of compounded levy on embroidered fabrics (at present charged at Rs. 45 per meter length of machine per shift) has been replaced by an ad-valorem duty of 10%. This change would come into effect from 01.04.2003. (8) Fabrics and garments manufactured by non-profit charitable institutions have been exempted from excise duty.
(c) Garments and other made up articles:
(1) Excise duty on all woven (including cotton) garments and made ups has been reduced from 12% to 10%. (2) Duty on cotton knitted/crocheted garments is being reduced to 8% while on other knitted/crocheted garments, duty has been reduced to 10%. (3) The duty on knitted and crocheted articles has been reduced from 16% to 10%. (4) The following exemptions have been withdrawn. These changes will come into effect from 01.04.2003.
(a) Textiles articles made from handloom fabrics (SSI exemption would be available). (b) SSI exemption on readymade garments. © Blanket of wool and shoddy yarn below certain price. The above list is not exhaustive. For full details, the Explanatory notes, clauses of Finance Bill and the Notifications may be referred to.
2.2 While changes in the rates of excise duty in respect of textiles (except where the present duty is Nil) will come in to effect immediately w.e.f. 01.03.2003, the withdrawal of exemptions, removal of scheme of deemed credit and removal of goods from SSI exemption scheme will come into force w.e.f. 01.04.2003. The Government has also decided that job-work facility will be made available to the textile sectors and a separate procedure would be devised to ensure that the large number of powerlooms in the decentralized sectors are not inconvenienced in any way and are exempted from maintenance of Central Excise records. The duty liability will be on the supplier of the raw material to the job-workers.
3. National Calamity Contingent Duty (NCCD):
For replenishment of the National Calamity Contingent Fund duty on following items has been imposed. 1) 1% on polyester filament yarn, motor cars and two-wheelers. 2) Rs. 50 per metric tonne on domestic crude oil.
This increase has vbeen made by amending the 7th Schedule of the Finance Act, 2001 through clause 126(1) and 161(1) of the Finance Bill. As a result, in addition to the goods already covered under the NCCD levy, these items willalso be liable to pay this levy. This levy will apply to imports also. This levy on the additional items will be valid for one year (upto 29.2.2004).
4. AED (Sales Tax) Act, 1957
Cenvat Credit Rules 2002 have been amended to allow credit of AED (GSI) paid for payment of Cenvat duty and special excise duty.
5. Petroleum Products
The Additional Excise duty on motor spirit (petrol) and high speed diesel oil has been increased from Rs. 1 per litre be (clause 159 & 160 of the Finance Bill).
Excise duty on light diesel oil (LDO) has been increased by Rs. 1.50 per litre (clause 147(a) of the finance Bill). No Cenvat credit will be allowed in respect of the duty paid on LDO. Excise duty concessions on ethanol doped petrol etc. have been continued for one more year.
6. Tea
Tea has been exempted from excise duty of Rs. 1 per kg. In its place an additional duty of excise of Rs. 1 per kg. by way of surcharge, for development of tea plantation sector, has been introduced. This will apply to imports also (clause 121(1) and 149(1) of the Finance Bill).
7. Health
Drugs and life saving equipments which are exempt from CVD (additional duty of Customs) are being exempted from excise duty.
Drug intermediates used captively in the factory of production has been exempted from excise duty.
8. Small Scale Industries Exemption Scheme :
8.1 With effect from 1.4.2003, SSI exemption will be withdrawn on _
(a) Ceramic tiles, printed ceramic tiles made from duty paid tiles outside the factory will, however, be exempt from excise duty. (b) Stainless steel patties/pattas. (c) Woollen yarn, shoddy yarn.
8.2 Value of exempted goods (excluding exports) will be included for calculating the limit of Rs. 8 crores for eligibility under SSI exemption with effect from 1.4.2003.
9. Medicinal & Toilet Preparations :
Changes have been made in respect of duty structure applicable to medicines and toilet preparations containing alcohol under the M&TP Act, 1955. These are given below :-
1) The amendment to M&TP Act, 1955 carried out vide Finance Act, 2000 will now come into force w.e.f 1st March, 2003. 2) Duty on toilet preparations containing alcohol or narcotic substances has been reduced from 50% to 16%. 3) Duty on medicines containing alcohol or narcotic substances has been reduced from 20% or specific rates to 16%. 4) Full exemption on Ayurvedic/Unani/Indigenous medicines, containing self generated alcohol and not capable of being consumed as alcoholic beverage, has been retained. 5) Toilet preparations containing alcohol or narcotic substances, will be assessed on maximum retail price (MRP) basis, with an abatement of 40% on the MRP.
10. Matches
Matches made on the non-mechanised sector have been fully exempted from excise duty. Specific duty rates on matches manufactured in the mechanized and semi-mechanized sector, have been replaced by a uniform excise duty of 8% without Cenvat credit. Bengal lights will also now attract duty at 8%.
11. Retail Sale Price (RSP) based assessment :
11.1 The RSP based assessment has been extended to pesticides, insecticides and chewing tobacco and preparations containing chewing tobacco. Sanitary ware and fixtures of ceramic have been excluded from the ambit of RSP based levy.
11.2 Rates of abatement on aerated water, air conditioners, biscuits, boiled sweets, sugar confectionery, scented supari and pressure cookers have been reduced by 5% consequent to the reduction of excise duty on these items.
11.3 Changes in defintion of RSP
1) The definition of retail sale price (RSP) as mentioned in Explanation I to Sector 4A of the Central Excise Act has been modified so as to extend it also to cases where the governing law on such goods permits declaration of retail sale prices exclusive of taxes. 2) Section 2(f) of Central Excise Act is being amended to provide that for goods presently covered under the provisions of Section 4A, any process of packing, re-packing, labeling or re-labeling of goods, putting them into unit containers or any subsequent declaration of RSP on goods or alteration thereof, shall amount to manufacture. 3) Provisions of Section 4A of the Central Excise Act are being amended so as to :-
(a) Provide that in case of affixing higher RSP subsequent to clearance of goods on payment of duty on a lower RSP, the excise duty would be leviable on the basis of such higher RSP affixed later on. (b) Assume powers to enable the Govt. to ascertain the RSP of goods having no RSP declared or the declared RSP being tampered with, obliterated or adhered, and (c) Assume powers to make rules for such ascertainment.
12. Service Tax
1) Rate of service tax is proposed to be raised from 5% to 8% (from the date of enactment of Finance Bill).
2) Service tax @ 8% is proposed to be imposed on the following services (to be effective from a date to be notified) :
a) Commercial vocational institutes, coaching centers and private tutorials. b) Technical testing and analysis (excluding health and diagnosic testing), technical certification. c) Maintenance and repair services, namely, Annual Maintenance Contracts (AMC) and other maintenance services; authorized repair services. d) Commissioning and installation services. e) Business promotion and support services including customer care services. These services include launching of products, customer education programmes, conduct of serminars, data warehousing, help desk services, managing front offices, enquiry bureaus, etc. However, computer enables services, namely, data processing, networking, back office processing, computer facility management shall not be subjected to Service Tax. f) Internet Café g) Franchise services h) Extension of service tax on port services to minor ports. i) Extension of service tax on authorized automobile services to multi-utility vehicles. j) Extension of service tax on banking and other financial services to all FOREX brokers. Presently, the services provided by banks and body corporates in relation to foreign exchange are covered under Service Tax. The proposal is to extend the same to proprietorship, partnership and other individual concerns providing such services.
3) The present exemption from service tax on hotels has been extended beyond 31.3.203. 4) Exemption from service tax when payments are received in convertible foreign exchange has been withdrawn. 5) Provisions have been made for allowing credit of service tax only when the payment has been made by the service user in respect of services provided. 6) Retrospective amendment to Notfn. No. 43/97-ST dated 5.11.1997 has been made so as to exempt service tax on services provided by Goods and Transport Operators to small scale units, traders and private limited trading companies for the period 16.11.2002 to 1.6.2003.
13. Default in payment of duty :
Under the existing procedure, in certain cases of default in payment of duty assessed under Rule 8(3) of the Central Excise Rules, the manufacturer is denied the benefit of utilization of Cenvat credit for certain period. This is being done away with and even in cases of default, there will be no denial of the credit nor the facility of paying duty in monthly instalments be with drawn. A system of automatic payment of interest at the rate of 2% per month or Rs. 1,000/- per day whichever is higher, has been proposed starting from the date on which the duty was required to be paid till the date of payment (subject to the interest not exceeding the duty amount).
14. Monthly payment of duty
14.1 From 1.4.2003, the fortnightly duty payment scheme will be replaced by monthly payment scheme. Duty for a month will have to be paid by 5th of the next month. However, for the month of March, the duty has to be paid by 31st March, both for SSI and non-SSI units. 14.2 It is also being provided that date of payment of cheque in the nominated Banks will be the date of payment of duty, provided the cheque is honoured.
15. For details, the relevant Notification Nos. 6/2003-CE to 17/2003-CE all dated 1st March, 2003; Nos. 8/2003-CE(NT) to 14/2003-CE(NT) all dated 1st March, 2003. Nos. 1/2003-ST to 3/2003-ST all dated 1st March, 203 and Nos. 1/2003-M&TP to 3/2003-M&TP all dated 1st March, 2003 may be referred to.
16. For any further assistance, the trade may contact the “Tax Payers Assistance Unit” as per Trade Notice No. 1/2003 dated 30.1.2003 located in the ground floor of this office.
(H.K. SHARAN) COMMISSIONER As per mailing list.
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