Duty on polyester chips, carbon black cut to 10%

Posted: Tuesday, Mar 21, 2006 at 0000 hrs IST
Updated: Tuesday, Mar 21, 2006 at 0000 hrs IST

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New Delhi, March 20: The Lok Sabha on Monday approved the Budget for 2006-07 by passing the Finance Bill by a voice vote after it approved a clutch of amendments on the indirect tax front. Finance minister P Chidambaram cut the basic customs duty on polyester chips and carbon black feedstock, which are inputs for synthetic textile and carbon black/ tyre industries respectively, to 10% from 12.5%.

He also restored the excise exemption for cottage industries namely candles, specified building bricks and scented supari sold at 50 paise or less.

The duty cut on polyester chips would benefit players across the synthetic textiles manufacturing chain. Thousands of texturising units in Gujarat and Maharashtra would, however, be the principal gainers as the tax incidence on filament yarn (PFY) process and the partially oriented yarn (POY) line would now be at par.

Texturisers convert POY to ready-to-weave yarn, while PFY goes directly to weavers. Mr Chidambaram said the duty cut was meant to correct the “inversion problem,” after the Budget decision to cut the import duty on PFY and POY to 10%.

He, however, rejected the industry’s demand to cut excise duty on PTA and MEG, both polyester intermediates of which Reliance is the largest domestic manufacturer, to 8%, citing revenue implications. The duty cut on carbon black feedstock would lead to a marginal gain for tyre firms. “Carbon black accounts for just 10% of the cost of tyre manufacture. The impact would, hence, be marginal,” said Arun K Bajoria, president, JK Tyres.

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