UpdateIndia plans tax sops for ferts, chemicals

29 February 2008 14:13  [Source: ICIS news]

By Divya Chowdhury

(Adds revised duties for chemicals and polymers throughout, and table)

MUMBAI (ICIS news)--India's finance minister Palaniappan Chidambaram proposed to give indirect tax sops to the fertilizer and chemicals industries in his 2008-2009 budget on Friday.

In order to support domestic fertilizer production, customs duty on crude and unrefined sulphur was cut to 2% from 5%.

Crude imported for any other purpose would continue to attract a duty of 5%.

The duty exemption on naphtha for use in manufacturing polymers was withdrawn and is now subject to the normal rate of 5%, Chidambaram said.

However, naphtha imported for the production of fertilizers will be exempt from any import duty, he added.

"Thanks to a complex regime of export benefits and duty exemptions, naphtha is exported from refineries and naphtha is imported by manufacturers of polymers, leading to price distortions and revenue losses," he said.

Customs duty on phosphoric acid and all project-related imports were cut to 5% from 7.5%.

Chidambaram also proposed not to change the peak rate of customs duty as the Indian rupee has appreciated 9.8% versus the US dollar since April 2007. The rupee is currently trading at Rs39.84/dollar.

The government will continue providing fertilizers to farmers at subsidised prices, and it is examining proposals to move to a nutrient-based subsidy regime and alternative methods of delivering the subsidy, Chidambaram said.

Polyethylene terephthalate (PET) and glycol-modified polyethylene terephthalate (PETG) were the only polymers on which the total payable duty was increased by more than 7% to 28.6%. Customs duties on both were unchanged at 7.5%.

On the excise front, the central value-added tax on all goods was cut from 16% to 14%.

The 1% excise duty on polyester filament yarn, which was the only yarn suffering this levy, was removed and shifted to cellular mobile phones.

Excise duty on specified packaging material was halved to 8%, while that on small cars and two- and three-wheelers was cut to 12% from 16%. Excise duty on hybrid cars was slashed to 14% from 24%.

"The government inherited a tax-to-GDP ratio of 9.2% in 2003-2004. At the end of 2007-2008, that ratio would have risen to 12.5%," Chidambaram said.

The government would suffer a loss of around Rs59bn ($1.5bn) on the back of these indirect tax measures, he added.

Total Duty Changes

Chemicals / Polymers

Existing Duty** (%)

New Duty*** (%)

Change (%)

Crude, naphtha, ethylene (C2), propylene (C3), butene, benzene, toluene, mixed xylenes, orthoxylene, cyclohexane, n-hexane, acrylonitrile, acetone, cumene, low-density polyethylene (LDPE), high density polyethylene (HDPE), polypropylene (PP), polyvinyl chloride (PVC), linear low density polyethylene (LLDPE), general purpose polystyrene (GPPS), high impact polystyrene (HIPS), styrene acrylonitrile (SAN), K-resin, acrylonitrile-butadiene-styrene (ABS), polycarbonate (PC), butyl rubber, ethylene vinyl acetate (EVA)

27.9

25.6

2.3

Paraxylene (PX), ethylene dichloride (EDC), vinyl chloride monomer (VCM), styrene monomer

24.2

21.9

2.3

Linear alkyl benzene (LAB), aniline, monoethylene glycol (MEG), diethylene glycol (DEG), triethylene glycol (TEG), methanol, isopropyl alcohol, 2-ethyl hexanol*, isononyl alcohol (INA), n-butanol, isobutanol, mostennol, phthalic anhydride (PA), maleic anhydride (MA), dioctyl phthalate, di-isononyl phthalate (DINP), dibutyl phthalate, acrylic acid, butyl acrylate, ethyl acrylate, methyl acrylate, 2-ethylhexyl acrylate ester (EHA), methyl methacrylate, vinyl acetate monomer (VAM), acetic acid, butyl acetate, ethyl acetate, phenol, methylene chloride, chloroform, carbon tertrachloride, methyl isobutyl ketone (MIBK), methyl ethyl ketone (MEK), propylene glycol, dipropylene glycol, propylene oxide, polyol, toluene di-isocyanate (TDI), methylene diphenyl diisocyanate (MDI), cycloheaxnone, epoxy resins, dimethyl fomadide, dimethylaminoethanol, isophthalic acid, butyl glycol, epichlorhydrin, bisphenol A (BPA), tetrahydrofuran, caustic soda, purified terephthalic acid (PTA), adipic acid, dimethylsulfoxide, acetonitrile, dimethylacetalamine, melamine, silicon oil, polymethyl methacrylate (PMMA), polybutylene terephthalate (PBT), polyoxymethylene (POM), polyester nylon chips

31.0

28.6

2.4

Solvent C9, caprolactam, ethanol, titanium dioxide (TiO2), nylon 6, nylon 6,6, nylon 12, nylon 11, nylon 6.12, EPDM rubber, SBR, masterbatch

34.1

31.7

2.4

Naphtha (for fertilizer manufacturing)

27.9

19.4

8.5

Acetone, phenol (for BPA manufacturing)

27.9

25.6

2.3

Epichlorhydrin (for epoxy resin manufacturing)

31.0

25.6

5.4

BPA (for epoxy resin manufacturing)

27.9

25.6

2.3

PET, PETG

21.5

28.6

-7.1

* Attracts anti-dumping duty, which varies with origin of product ** As on 29 February *** As on 1 March

($1 = Rs39.84)


By: Divya Chowdhury
+65 6780 4359



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