All India Plastic Manufacturers Association

Shri P. Chidambaram

Hon’ble Union Minister for Finance

Ministry of Finance

Government of India

New Delhi.

Re: Our proposal for Budget 2007-08.

Dear Sir,

We submit herewith our detailed proposal for the Budget 2007-08 for your kind consideration. While the detailed proposal is attached for your perusal, please find below, in a nutshell, our suggestions for the Budget.

1. Duty on raw materials to be brought down by 5% and processed goods to be kept at the present level.
2. Withdrawal of 1% landing charges for duty calculations.

1. Excise Duty on Chapter 39 should be brought down from 16% adv. to 8% adv.
2. Limit of SSI Exemption upto annual turnover of Rs.1 Crore should be raised to Rs.3 Crores.
3. Concessional rate of Excise Duty @60% of applicable Duty be reinstated. The turnover limit of Rs.1 Crore for Concessional Duty which was in earlier years should be increased to Rs.2 Crores.
4. A similar scheme as implemented in Textile Policy w.e.f. 01-04-2005 vide notification Nos.29 and 30 may be made applicable to Plastic Products.

1. Uniform VAT in all States

1. Abolition of CST

FBT

Withdrawal of FBT on the units with less than Rs 50 crores turns over.

Service Tax

Service tax limit to be raised to turn over of Rs 10 lakhs.

Hope you would consider our submission favourably.

Thanking you,

Yours faithfully,

Harish Dharamsi

President

HIGHLIGHTS

Page No.

Ø Customs Duty from 5% to 0% 1

Ø Reduction of Excise duty from 16% to 8% on 2

Chapter 39

Ø Excise Exemption Limit for SSI to be increased from 2

Rs.1 crore to Rs.3 crores

Ø Introduction of exemption of excise on Plastic Products 2

in line with Textile Policy.

Ø Uniform VAT Rates @ 4% on all plastic productions 3

Nationally.

Ø Central Sales Tax to be withdrawn immediately 4

Ø FBT to be withdrawn for SME having turnover 4

upto Rs.50 crores

Ø Responsibility of collection of Service Tax must be rested with person providing service.

The Current Scenario

Present customs duty structure on:

a) Commodity Polymers C39.01, 39.02, 39.03, 39.04, 39.05

b) Other Polymers & Scrap, and

c) Plastic products is 39.16, 39.16 as follows:-

• For the next five years, Ministry of Chemicals & Fertilizers has envisaged that processing of plastics products will touch a figure of 120 Lakh Tones against 45 Lakh Tonnes in 2006-07.

• Production capacity, including the expected increase in next two years, will reach a maximum of 75 Lakhs Tonnes per annum.

• The balance requirement, which is sizeable, will have to be met from imports of Polymers.

• Prices of Polymers have shot up by 40% to 50% in 2006 and are expected to firm up at that level.

Based on the above observations, we suggest that:-

1) Duty on:

1. Commodity Plastics Polymers (Chapter 39.01 to 39.05) should be brought down from 5% to 0%.

- 2 -

2. Other Plastic Polymers (Chapter 39.06 to 39.14) and Plastic Scrap (39.15) should be brought down from 12.5% to 5%.
3. Plastic Product (39.16 to 39.26) should be kept at the present level.

2. Traditionally Customs Department adds 1% as landing charge on CIF value before calculation of duties. It has a cascading effect when final duty is worked out and paid. Such hidden costs could be avoided if Customs Department is asked to do away with this practice. We recommend withdrawal of this Landing Charge.

Incidentally, we may point out that non oil imports for 05-06 have been to the tune of USD 96.4 Billion. 1% duty on this amount will be 0.964 Bn. USD.

Excise Duty

The Current Scenario

Present Excise Structure for Chapter 39 is as follows:

Excise Duty @ 16% advelorum

Exemption for SSI Units upto an annual turnover of Rs.1 Crore and full Excise duty thereafter.

Concession to SSI Unit from charging 60% of the applicable duty upto a turnover of Rs.1 Crore was withdrawn w.e.f. 01-04-2005.

We suggest following changes:-

a) Excise Duty on Chapter 39 should be brought down from 16% adv. to 8% adv.

b) Limit of SSI Exemption upto annual turnover of Rs.1 Crore should be raised to Rs.3 Crores.

c) Concessional rate of Excise Duty @60% of applicable Duty be reinstated. The turnover limit of Rs.1 Crore for Concessional Duty which was in earlier years should be increased to Rs.2 Crores.

4. For manufacturers of Plastic Products of Chapter 39.16 to 39.26, a similar scheme as implemented in Textile Policy w.e.f. 01-04-2005 vide notification Nos.29 and 30 may be made applicable to Plastic Products viz. Manufacturer can avail of Exemption from Excise in case Credit of Cenvat on inputs is not availed of.

We have offered our suggestions based on the following facts:-

• Prices of Polymers have almost doubled in last two years and look to be firming up at that level. Under these circumstances, there will be no loss of revenue to the Government even if Excise Duty is reduced.

• Cascading effect of excise duty will also get reduced proportionately.

• Financial requirement of the Manufacturers will get reduced. This will be most important point from the angle of Plastics Processors who are financially not strong.

• Excise exemption limit of Rs.1 Crore annual turnover was fixed almost 10 years back. During last decade prices of raw materials and other inputs like power, labour, transportation, and finance have gone up by two to three folds. Hence, the suggestion of raising the Exemption limits.

• Concessional rate of Excise Duty to the manufacturers, especially from SSI, was to help them to enter the Excise stream and to mitigate cascading effect of Excise Duty. By this scheme a credit in Excise was utilized to partially set off the cascading effect. By removing this concession, Government has equated an SSI Unit with a unit in organized sector which is totally unfair and hence a request for a change.

• It is well known fact that for most of the Plastic Products, the Cenvat chain breaks at the 1^st stage itself. It is for this very reason that most of the manufacturers stop production at that level or sales are diverted to other firms. If the option as suggested is given to the manufacturers, it will help them to:

• utilize full production capacity,
• offer their products at most competitive price as constraints of production and cascading effect of Excise Duty will be overcome.
• keep their products competitive to imported products (even if they are under invoiced).

If a uniform Vat of 4% is made applicable, the product will be competitive in markets all over India and will help curtail grey market.

VAT

VAT rates in different states vary from 4 to 12.5%. It would be in the interest of the industry that the Empowered Committee may be requested to bring uniformity in the rates. It was reported in the press that rates of VAT are being streamlined on the Excise classification. It would be a welcome sign if this is implemented in the Budget of all states from 01-04-2007.

If VAT rate is reasonably kept at 4%, it would boost the sales turnover.

Central Sales Tax

A step towards abolition of Central Sales Tax should have been taken at the time of implementing VAT. While Government is keen on signing FTA’s with neighboring countries reducing duties, no appropriate step of abolishing CST as well as Octroi/Entry Tax etc., which are barriers for free trade within states, has been taken. If logic had prevailed, CST should have been abolished way back in 2004.

Besides maintaining CST records every year, new bureaucratic hurdles are forced on the Manufacturers/Traders; latest being the submission of ‘C’ Form for each quarter. You have to experience the difficulties of obtaining ‘C’ Forms from the Sales Tax Office to understand our plight. Instead of making it easy for the business community to concentrate on production and sales, time is being wasted in obtaining ‘C’ Forms, submission of returns and attending assessments of Sales Tax.

It is essential that the Empowered Committee on VAT also should look into the difficulties of Interstate Sales.

Fringe Benefit Tax

Hon. Finance Minister, while introducing FBT, had specifically stated that he wished to aim at the expenses incurred by multinationals and big corporates on the facilities offered to their Senior Staff. As usual, this point has remained in background and small business men/manufacturers’ are the ultimate sufferers maintaining records of petty but essential payments such as tea, coffee, snack expenses incurred on staff and payment of FBT on the same. It appears that FM has handed over an additional tool for harassment.

If the Governments intentions are proper, this FBT should be withdrawn for those business houses whose annual turnover falls below 50 Crores and save them from the additional burden and documentation work.

Service Tax

While the Ministry is busy in adding new services and increasing the rate structure, no possible step has been taken to force the liability of service charges on the Transport Contractors. Many Units have to take service tax nos., maintain records and pay the service tax, file returns only for the Transportation charges.

If the Government is unable to force collection liability of Service Tax on Transport Contractors, the service tax on Transport of goods should be withdrawn to avoid inconvenience to the Manufacturers.

We also suggest that Service Tax exemption limit also should be raised upto an annual turnover of 10 Lakhs so that smaller service providers are not harassed by the concerned department.