30 December, 2014

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4 Main Reasons of Durables Makers for Wants to Reduce Excise Duty after 31 December 2014.

The previous government in its interim budget in February 2014 had announced 2% cut in excise duty on consumer durables and fixed the rate as 10% till 31st July, 2014 (Notification No. 4/2014-Central excise, dated 17 February, 2014). While the current government, further extend this reduced rate for six months which will end on December 31, 2014. 


The consumer durables industry want to continue with reduced excise duty rates after 31 December 2014, stating that higher tax rate could lead to increase in sales price which would further worsen the phase of continued sluggish sales.

Increase in excise duty rates after 31st December, 2014, as stipulated by the current government, will further add on to already high cost of production.

This industry of consumer durables has been going through a bad phase of economy which has been explained here as under:

1. Sluggish sales
Poor monsoon rain has hit India in north and central regions in the current fiscal year 2014-15. This has led to droop in its demand. There has been negative rate of growth of sales since June 2014. Increment in excise rates by 2% will increase the product prices which will ultimately affect the growth rate of sales of consumer durable industry.

2. Increase in product price
The increase in product price will affect the already sluggish sale. Increase of 2 % in excise duty rates will lead to price rise. Thus, current government is expected not increase the excise duty rates after December 31, 2014.

3. New Energy reforms on refrigeration
Another issue that consumer durables makers are facing is new energy efficiency norms that direct cool refrigerators manufacturers, which are to be complied from January 1, 2015. Thus, it is another reason which would add on to its cost.

As per the Bureau of Energy Efficiency, the energy efficiency ratio for all-star brands in direct cool refrigerators would go up from January 1, 2015. It would mean that for all the star brands ranging from 1 to 5, companies will have to decrease the energy consumption for each of the rating, increasing costs in turn.

4. Value of rupee
The companies have been already up against high input costs due to weakening rupee. The low value of rupee in international market results in high importable input cost.
The increased in excise duty after 31 December, 2014 will add on more hurdles to sale of consumer durables for this industry. As the industry is already facing these issues in their product prices.











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