Indian Council of Ceramic Tiles & Sanitaryware

Budget Wish List of ICTCAS

Issue I: Rationalisation of Excise Duty on Ceramic Tiles

Ceramic Tiles are classified under Chapter No.69 of the Central Excise Tariff Act and they attract Excise Duty @ 16%. However, since this product is one of mass consumption, especially by rural population, the rate of Excise duty needs to be rationalised. While we appreciate the Central Government’s thrust on rapidly developing infrastructure including the housing sector especially in the rural areas, this objective will receive a major boost if the duty on Ceramic Tiles is reduced from 16% to 8% in the tariff itself and in line with the Excise Duty tariffs prevalent on products used by the housing industry like building blocks, wood articles, mica articles (vide Notification No 10/2006), roofing tiles (vide Notification No 36/2006). You will appreciate development of housing sector is a thrust area of both the Central and State governments. However, it is noticed that several products of non-thrust areas like footware, textile, pressure cookers, imitation jewellery (vide notification no 5/2006), sunglasses, audio cassettes, toothbrushes (vide notification no 10/2006) are classified at 8% Excise Duty.

It is needless to mention that India being a developing country, constructing a house is a result of a lifetime savings for the individuals it is, therefore, important that Ceramic Tiles are made available at affordable prices.

The Indian Ceramic Tile Industry has already has passed almost all the benefits derived out of optimisation of the industry to the consumer by cutting down tile prices to the maximum. Here, it is relevant to note that the prices of tiles have been cut year-on- year despite substantial increase in the raw material and other input costs. In this scenario of competitive pricing, the local manufacturers have survived only due to increase in sales volume. This is visible from the fact that size of the Indian ceramic tile industry was about 220 million sq. mtrs. in the year 2003 which has now increased to 303 million sq. mtrs in the year 2005.

As ceramic tiles have extensive usage on walls, floors, kitchen and washrooms in a house. The aforesaid objective of the government will not receive the desired impetus till the Excise Duty structure is not rationalised.

We appeal to you to rationalize the current Excise Duty applicable on ceramic tiles from 16% to 8%. Given the increased volumes year-on-year, it is safe to assume that inspite of the Excise Duty being reduced from 16% to 8%, the overall Excise collection of the Government from ceramic tiles is only likely to only increase as the consumption volumes are bound to shoot up further. Moreover, the objective of the Government to give a fillip to the housing sector especially rural housing sector will be achieved. It is relevant to point out that there are several products existing in the housing sector, which currently attract 8% duty and are also allowed to avail the benefit of Cenvat.

Alternative Request

In the event our aforesaid request cannot be considered sympathetically we pray that the condition No.7 to Notification No.5/2006 be deleted so as to enable the Ceramic Tile Industry to avail Cenvat Credit and to discharge Excise Duty @ 8% for clearance of Ceramic Tiles, manufactured in the factory not using electricity for firing the kiln.

We sincerely hope that in line with the Government’s Policy giving a major thrust to the housing sector one of our request will be favourably considered.

Issue II: Anomaly of Inverted Duty Structure

We appreciate the efforts made by the Union Government in correcting the anomaly of inverted duty structure as far as inputs and raw materials are concerned. However, we wish to draw your attention to a live situation where inverted duty structure needs to be corrected by taking the example of Ceramic Rollers. Ceramic Rollers is a raw material that is largely used by the Indian ceramic tile industry in the manufacture of tiles. A very small portion of ceramic rollers is also used by roofing tile industry. Out of the total import of Ceramic Rollers, approximately 99 per cent of the ceramic rollers are used by the ceramic tile industry while the balance 1 per cent is used by the other industry i.e. roofing tiles. It is important to point out here that just because 1 per cent of the imports are by the roofing tile industry, it would be unfair not to correct the anomaly of inverted duty structure for this particular product and let the ceramic tile industry suffer.

Moreover, it should be noted that China is the largest manufacturer of tiles in the world. As China is a non-market economy several types of assistance, concessions, aids etc are available to the ceramic tile industry. This gives them an unfair advantage over the Indian ceramic tile industry. As a result, import of ceramic tiles from China is much cheaper and is therefore in huge volumes.

We invite your attention to the following chart, which is self-explanatory.

In the aforesaid chart you will kindly observe that just because a small portion of the import of raw materials is by industries other than Ceramic Tile Industry, the anomaly of inverted duty structure on these raw materials is not being corrected. We humbly submit that this is drastically hitting the Rs.4500 Crores Indian ceramic tile industry as against the other industries, which are relatively smaller in size. We request you to kindly look into this and correct the situation for us.

It maybe noted that the afore-mentioned list of raw materials are primarily consumed by ceramic tile manufacturers to manufacture tiles. The existing anomaly provides an unfair advantage to the trader who imports tiles (finished products) directly from China resulting in great de-motivation to the local manufacturers.

This is not helping the domestic manufacturer in any manner as the government through its Notification No 72/2005-CUSTOMS dated July 22, 2005 has already given an additional concession on custom duty to ceramic tiles (i.e. the final product) imported from China. Consequently, ceramic tiles falling under Customs Tariff sub-heading Nos. 6907 and 6908 are now allowed for import from China at 5.37% Basic Custom Duty as against the higher Tariff rate applicable on import of the afore-mentioned raw materials.

The implication being that, the domestic manufacturers importing raw materials used in the manufacture of ceramic tiles have to pay a higher custom duty compared to an importer importing finished tiles from China at 5.37% basic custom duty. Such unfair custom duty structure provides the tile importer an unfair price advantage over locally manufactured products. This will definitely sound the death-knell for the local manufacturers and thwart fresh investments being made in the industry.

It is imperative that the Basic Custom Duty on raw material should be kept lower than the Basic Custom Duty on finished goods, so that an impetus is given to the local manufacturers, fresh investments are encouraged and a level playing field is created.

We request you to take up our case with the government to lower the duty on raw material and intermediates to 5% or less thereby creating a level-playing field for the local manufacturers and permit the ceramic tile industry to take Cenvat of input duty paid.

Issue III : Low Abatement on MRP

Ceramic tiles are assessed to Excise Duty on the basis of MRP. Presently the abatement on MRP for the purpose of calculation of excise duty is allowed at the rate of 45%. Given the high costs pressures that we are operating on, this abatement is insufficient. This low abatement is hampering the industry’s competitiveness.

Here, it is pertinent to note that with the increasing middle class population in the rural and semi urban areas, the ceramic tiles have to be transported at longer distances from the location of manufacture. This increases the transportation cost substantially as tiles are bulky material.

This increase in abatement will help us in making our products more affordable to the masses and the huge rural population can improve their quality of life by using this hygienic product. A chart containing various factors which determine abatement is enclosed and marked as Annexure 1. On going through the same you will observe that an abatement of 50% is justified.

 For Indian Council of Ceramic Tiles & Sanitaryware

(G. Govindaswamy)

Secretary General