7.

MRP Based Levy On Automobile Parts And Components: Abatement Rate to be Increased on MRP for Automobile Spare Parts

It is requested that the abatement rate to be increased to 55% for automobile spare parts.

With effect from 01.06.2006, MRP based valuation has been introduced for automobiles parts and spare parts. The present abatement of 33.5% on MRP is allowed for calculation of excise duty. The abatement rate is very low. For example if our MRP is Rs.100/-, then total margin available to trade is Rs. 1.28 only.

It is obvious that actual margin to various intermediaries in distribution channel is much more than 1.28%. As per our estimate it is around 30%.

The abatement rate announced has led to an increase in the effective excise duty payable compared to what it was before. Consequently the whole spare-parts and after sales operation has become unviable, which can be addressed only by significant increase in prices.

8.

Multiple Taxes /levies –Basic Excise Duty, Automobile Cess, NCCD, Education Cess.

These multiple levies should be merged into a single rate of Excise Duty.

Multiple levies distort the system. Also, while introducing NCCD, it was initially planned only for one year. Because of this, a manufacturer has to maintain separate accounts. NCCD levy increases the product cost by 1% with multiple tax rates.

Multiple types of excise duty complicate administration and distort the system. One single type of excise duty will make the implementation easier for the Govt., as well as the industry. Any allocation of revenue could be done internally by the govt. by proper legislation.

9.

Additional Education Cess: Secondary & Higher Education Cess.

It is suggested that existing Education Cess should be raised to 3% instead of imposing under a separate head.

Administratively it will be cumbersome to deal with 2 Cesses. Companies would be required to maintain separate accounts.