Customs duty exemption sought for fertilisers

23 Dec 2010 • by Natalie Aster

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the finance minister to exempt project imports for fertilizer sector from customs duty in his budget proposals for 2010 -11 and also demanded deemed export status to indigenous supply of capital goods, used in all new investment in fertiliser projects.

In its pre-budget memorandum submitted to the Finance Ministry, the ASSOCHAM has also demanded waiver of excise duty on capital goods, used in fertiliser projects and urged that capital goods, used in fertilizer products, be exempted from sales tax and value added tax (VAT).

In addition, the chamber has also highlighted that tax holiday under income tax act should be extended to all new fertilizer projects for a period of 10 years so that the sector acquires self reliance in terms of meeting most of domestic demand.

The ASSOCHAM President, Dr. Swati Piramal pointed out that domestic capacity and production of fertilisers have stagnated for more than a decade due to unfavourable policies. The demand for fertilisers on the other hand has been rising continuously. This has resulted in steep rise in imports of finished fertilisers thereby increasing the subsidy requirement further.

Thus, there is an urgent need for attracting fresh investment in this sector for creation of additional capacity. The government has notified new investment policy in September, 2008 but, the pricing policy environment has not attracted investment in major expansion or new projects so far, as the viability of new investment is still uncertain under the policy. The government, therefore, needs to provide aforesaid tax incentives to make new investment in fertiliser sector viable, said Dr. Piramal.

The ASSOCHAM is also of the view that other tax incentives also needed for fertilizers sectors since the use of fertilisers is subsidised by the Central government to keep their prices (MRP) within affordable limit of farmers to encourage consumption for accelerating agricultural production and productivity. Levy of taxes and duties either on inputs or on finished fertilisers or on services utilised in production and distribution of fertilisers

increases the cost of fertilisers and consequently the subsidy outgo. This goes against the purpose of subsidisation which is to keep the price of fertilisers low so that the farmers can afford it. It is, therefore, submitted that fertilisers and inputs in general should be exempted from imposition of taxes and duties.

The ASSOCHAM has pressed for withdrawal of excise duty on Fuel Oil/LSHS used for fertiliser manufacture, as also demanded waiver of excise duty on HDPE bags used for packing fertilisers. In addition the chamber called for withdrawal of customs duty on LNG, Project imports & spares for fertiliser projects , Ammonia, Phosphoric acid,Rock phosphate, Sulphur, Sulphuric acid and Capital goods for implementation of Clean Development Mechanism (CDM) projects for fertiliser sector.

According to ASSOCHAM, withdrawal of service tax on services related to fertilisers and inputs for fertilisers and agriculture is also need it. However, withdrawal is not possible, at least concessional rate of service tax on services for fertilisers and agriculture is suggested which include Storage and Warehousing charges for Fertilisers, Intellectual Property Services which include design, process, technology, Construction of commercial and industrial building or civil structure.

The other similar services comprise commissioning and installation/erection services etc. including such services meant for the fertiliser projects, Commission paid to commission agents dealing in inputs used in fertilizer manufacture, which in turn, increases the cost of fertilisers and consequently the agricultural produces, transport of goods (fertilizers) by road services and Cleaning services,

Source: Commodity Online


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