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Assessable value: After CBEC notice to Maruti, automakers seek FinMin help

Industry body SIAM to meet ministry officials on Monday to press its case.

By: ENS Economic Bureau | New Delhi | Published: November 14, 2015 1:19:14 am

The country’s automobile industry has knocked on the doors of the finance ministry for a legislative amendment to the Central Excise Act so that the sales tax incentives provided to it by various state governments do not get added to the assessable value of the product for payment of excise duty.

In the absence of such an amendment, the excise duty outgo by the industry would increase and negate the very purpose of providing sales tax incentive, automakers argue.


Auto industry body Society of Indian Automobile Manufacturers will be meeting finance ministry officials on Monday to press its case. A legislative amendment to Section 4 of the Central Excise Act is required because the direction to add such benefits to the assessable value of the product for payment of excise duty has come from the Supreme Court through two of its orders, one in the case of Super Synotax India in February 2014 and the other in CCE vs Maruti Suzuki in September 2014.

The industry has woken up now since the Central Board of Excise and Customs is understood to have sent a notice to Maruti Suzuki based on the judgment and sources said Tata Motors, Mahindra and Mahindra, and Toyota Kirloskar are also on its radar.

There are broadly three kinds of sales tax incentives provided by the state governments: Full exemption, where one does not need to pay any sales tax; deferred payment, where the amount is to be collected from the consumers but is to be paid later to the government, say after 5 or 10 years; and three, where companies pay 50 per cent of the sales tax upfront and the balance 50 per cent after five years. The first case is a complete exemption so is completely outside the purview of any taxation. In the second case, since the entire amount is to be paid on a deferred basis, the CBEC clarified through a circular in 2002 that the interest on the amount retained would not be deductible from the assessable value. Therefore, the SC had ruled via the two orders only on the third category, where 50 per cent payment is to be made later, that the entire retained amount – principal as well as interest – should be added to the assessable value for payment of excise duty.

The country’s largest carmaker, Maruti Suzuki falls in the third category in Haryana, where it has two plants at Gurgaon and Manesar, and would be affected by this ruling. Industry sources say that even Tata Motors and Mahindra and Mahindra in Maharashtra and Toyota Kirloskar in Karnataka have similar incentives and may be affected.

The industry’s plea is that a suitable legislative amendment be made by the government which makes such incentives offered by state governments outside the ambit of excise duty. Their contention is that excise duty is payable on transaction value of the sale of vehicles, ie, price charged by the seller from the buyer.
Sales tax and other taxes are to be deducted from the above transaction value if such tax is actually paid or is payable on such goods.

“The amount of sales tax collected and retained by the manufacturer, as allowed under an incentive scheme launched by the state government, should be considered as equivalent to sales tax actually paid under the excise law and thus should not be added to the assessable value of goods for excise duty calculation. This should be made effective from date of amendment,” an industry source said.

With inputs from Financial Express

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