Revenue department of the Indian government has presented its decision to impose excise duty on on the cost of manufacturing rather than the discounted price of sale. This news has came as a sign of relief for the auto makers in the Indian auto market. It must be noted that the Central Board of Excise and Customs has made it very clear that all the passenger car makers are required to pay the excise duty on new norms, following the order of Supreme Court.
Expressing his views on this development, an official from Finance Ministry was quoted as saying, “There will be no retrospective application of the Supreme Court order. Tax Department will go after car makers in case of genuine suppression of tax dues. Excise levy will have to be paid even in case of sale price being lower than manufacturing cost.”
On the same lines, an official from Central Board of Excise and Customs, said that “is working on extending the decisions for auto makers to companies in other sectors as well. The Supreme Court judgement will apply to all sectors."
Industry experts are of a view that in order to come out of the declining sales, car makers in India are offering a number of freebies and goodies; however they are required to pay the excise duty on production cost. Also, the Central Board of Excise and Customs has softened its stance at their meeting and declared that the tax will be only enforced prospectively. On August 8, the Chief Commissioners of Central Excise had a meeting with the board of indirect tax and announced that the auto makers will be given sufficient time to represent their petition. The official said, “Tax Department will not harass auto makers.”
In 2013, Supreme Court ordered that if a manufacturer sells its products at loss for a long tenure because of competitive pressures and commercial considerations, then the price will not be sole consideration and therefore, excise duty will be charged on the production cost with a reasonable profit margin. The decision of the department to expand this concept to other production sectors, wherein companies are offering discounts and selling their products at less than their cost price to boost sales, has impacted on the revenues of producers.
It must be noted that the output of production sector has already seen a downfall and the government is also working towards boosting the output, which increased by just 1 per cent in the last fiscal year.
