Considering the fact that cement is vital for infrastructure development, the 219-million tonne Indian cement industry believes that it is burdened with high taxes, which are far more, compared to any other commodity.

With the Budget round the corner, industry players are seeking relief on certain taxes that would provide support to the industry, which is expected to soon face a slowdown in demand with the approaching monsoons .

Says Vinita Singhania, vice president of CMA and MD of JK Lakshmi Cement, ?The biggest concern for the industry is the present system of levying of excise duty on an MRP basis, without any abatement. In case of cement, the post manufacturing expenses are very high, notably the freight component and the VAT (value added tax) component. Therefore, the industry has requested the government to allow an abatement of 55%, which is as per the recommendations of NCAER.?

Meanwhile, the industry also wants to bring down the VAT for cement in line with steel, which is charged a VAT of just 4%, compared to 12.5% in cement. ?We have, therefore, requested the Centre that the anomaly between steel and cement, as far as taxation is concerned, should be removed,? Singhania adds.

The cement industry, until November last year, was hit by a slowdown in demand as the housing sector, which accounts for 60-65% of cement consumption, is facing a severe downturn. This is due to the fall in demand on account of the high interest rates, credit crunch and high real estate prices.

The revival in demand took place due to higher spending by the government on infrastructure projects and a strong demand from personal home building activity in rural and semi urban areas, due to which, which the industry reported 8.6% YoY higher growth. The cement industry is further expected to add about 35-40 million tonne of fresh capacity in FY 2010, taking the total to about 260 million tonne per annum, say experts.

Also, the Centre in December, had reduced the excise duty on cement by 4% to 8% in its stimulus package to support the industry. But the industry, it seems, wants more.

Adds Vinod Juneja, MD of Binani Cement, ?We expect the excise to duty to be cut down further to 4% along with zero import duty on coal.?

Presently, the import duty on cement is zero, while its inputs?such as coal, petcoke, gypsum, etc, if imported by the domestic manufactures, are charged an import duty of 5%, which according to the industry players is creating an anomaly that import duty of inputs is higher than the finished product.

Going ahead, cement players are also betting on infrastructure spends by the new government that would increase the demand for the commodity in the country.

Players believe that infrastructure development would entail building of modern ports, new super express highways, concretisation of roads, emphasis on canal lining etc, which would help the cement industry to cope with the oversupply which is likely in the second half of FY10.

Taxing times

•A major concern is the present system of levying of excise duty on an MRP basis

•The industry also wants an abatement of 55% on the post manufacturing costs

•The industry was hit by a slowdown in demand as the housing sector faced a downturn

•The import duty on cement is zero, while its inputs are charged an import duty of 5%, and this creates an anomaly

•Cement players are also betting on infrastructure spends by the government which would increase demand for cement