Plastic products Cut excise duty on polymers

Plastic products Cut excise duty on polymers




Seeks removal of custom duty on commodity polymers and cut in others, but also seeks hike in customs duty on plastic products.

Current status

The Indian plastics industry comprises around 55,000 plastic processing units, spread over both the organized and unorganized sectors, employing an estimated 0.4 million people. About 75% of plastic processing units are in the small-scale sector and these account for about 25% of the total production. There are about 2000 fibre processors, of which 80% are in the small-scale sector.

But with the recent fall in polymers price from peak level and slowdown in world economy, the plastic industry is grappling with cheap import of the plastic products. Due to slow Cable Tiesdown in USA, China and Thailand the biggest exporter to US, are trying to push their products in India [ Images ].

The plastic product industry is facing huge imports of plastic goods at a much lower cost. Most of these readymade plastic products are coming via under-invoicing, giving stiff competition to the local converters. In case of under-invoicing, the importers show lower cost of imports in the invoice and try to save customs, excise and other taxes on that. Hence, the resultant tax evasion makes these products cheaper.

Industry expectations

The plastic product industry want the custom duty on commodity plastics polymers which presently is at 5% to be brought down to zero so that the industry have sufficient import at reasonable landed cost to tide over perennial shortages & to meet the target of 120 lakh tonne of plastics production. While on other polymers, industry expects custom duty to be brought down from current level of 7.5% to 2.5%.

Along with it, the industry also wants withdrawal of 1% landing charges for duty calculations and removal of anti-dumping duty on polymers. Also on electric jackPlastic Scrap, duty should be brought down from 7.5% to at least 5%. Poly Amide Resins (Nylons) also should be in parity with other Engineering polymers and the duty brought down from present level of 10% to 5%.

The industry wants custom duty on processed goods to be hike from 10% to 20%.

One of the important want of the industry was reduction in excise duty from 14% to 8%, which the government has done in its last 2-stimulus package. Now, the industry want concessional rate of excise duty at 60% of applicable duty, be reinstated for small scale industry (SSI) with appropriate lines along with uniform VAT in all states, abolition personalized giftsof central sales tax and removal of FBT on the units with less than Rs 50 crore turnover.

The industry also expects specific provision in the Cenvat Credit Rules clarifying the duty at the time of clearances is required. The industry is also looking for service tax limit to be raised to turnover from Rs 10 lakh to 20 lakh so that the concerned department does not harass smaller service providers. The industry also wants ban on applications for Anti Dumping Review on fiber isolatorplastics raw materials (Polymers) at least for two financial years.

Analysts'/market expectations

Since the government has already cut down the excise duty by 600 basis points (in December 2008 by 400 basis points and in February 2009 by 200 basis points), no future cut is expected Rubber product supplierin excise duty. Also, the government focus on cutting custom duty for polymers will be very less. The government may come out some policies or announcements, which may help SSI. On an average, it seems that industry's expectation to large extent won't be fulfilled by the present government.

Stock to watch

Sintex Industries [ Get Quote ], Jain irrigation, Nilkamal, VIP industries [ Get Quote ].

Outlook

The demand for plastic products is yet to crawl back to normal levels. The cut in excise duties from 14% to 8% augurs well, especially for players selling to final consumers. But now the plastic products industry faces double-edged sword as on the one side it faces low cost import and other sided the rising polymer prices.

After few years of strong double digit growth, India is encountering sluggish trend in polymer consumption in the current fiscal with key user industries like automobile, construction, consumer durables etc witnessing sharp deceleration in growth. The players' ability to cushion their margins from the volatility of the polymer prices also remains limited.

Only the government's emphasis on infrastructure, special announcements on key sectors like telecom, automobiles, etc in the coming Budget can bring cheer to the plastic industry.