Tricks and tacts are a part of the commercial world, but now this could cost the firms a heavy burden on their pockets. The government has now directed the companies, who are selling their products below the manufacturing price to pay an additional excise duty over the normal product price (production cost plus profit). Center’s decision will be applied on all those firms who are aiming to increase their market penetration with this strategy. The verdict from Finance Ministry came up following the Supreme Court’s decision of last year when it upheld the levy of excise duty on Fiat’s discounted Uno brand.
The government’s decision is likely to give a double blow to some of the major sectors like automobiles, oil marketing, fast-moving consumer goods (FMCG), consumer durables, information technology (IT) hardware, fertilizer & chemicals as most of the companies are selling their goods at cut price so as to gain an upper hand in the present competitive market. Soon, these companies are likely to get notices from the excise department. The Central Board of Excise & Customs (CBEC), however, is finalizing all the safety measures so that the companies are not hit by the supreme court’s decision any further. The board is trying to clear that the excise duty would be levied to those companies only who are selling their products at a discounted price, which is below the cost, owing to sudden increase in raw material cost or increase in interest rates, or under some government policy.
The Society of Indian Automobile Manufacturers (SIAM) and some other industry bodies has provided all the relevant details of situations other than the market penetration to CBEC. They have suggested that the senior officials of a company should not be summoned before hand by revenue authorities before any further action on them.