The Central Board of Excise and Customs has clarified that manufacturers will have to pay excise duty on the selling price, even if discounted, and not the production cost plus profits as ruled by the Supreme Court in the Fiat case in 2012.
The move is likely to bring a relief to sectors including automobile, consumer goods and others, which sell goods at a discounted price to attract buyers, penetrate and compete in the market.
According to a notification issued by the CBEC, effective Friday, if a manufacturer sells goods at a price less than the cost of production plus profits, the transaction value will be used to calculate the levy.
Earlier, following the Supreme Court ruling in August 2012, which rejected Fiat India’s demand of paying tax on the discounted sale price on the grounds that it was a consideration for market penetration, the department had sent show-cause notices to several auto and tyre companies among others, and had asked them to furnish cost data of various products for the past years.
“Provided that where price is not the sole consideration for sale of such excisable goods and they are sold by the assessee at a price less than manufacturing cost and profit, and no additional consideration is flowing directly or indirectly from the buyer to such assessee, the value of such goods shall be deemed to be the transaction value,” the amendment to Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, said.
Pratik Jain, partner, KPMG, said, “Industry had been demanding this for some time now. The clarification is good for the industry as it promises to solve the issue prospectively. At a time when the government is trying to give a push to the manufacturing activities, the decision will go a long way in providing a filip to the sector”.
The clarification comes amid a slew of measures announced by finance minister Arun Jaitley in his maiden Budget on Thursday.