Budget 2012: Excise duty hiked to 12 per cent on pesticides

The following changes in the duties have been proposed in the Union budget 2012-13:

 Excise duty hiked from 10 per cent to 12 per cent.

 No change in peak customs duty

 Service tax rate raised from 10 per cent to 12 per cent

 Proposal to tax all services except those in the negative list comprising of 17 heads

 DTC Implementation deferred

 GST to become operational by August 2012

 No change in corporate tax rates

 Steam coal is being fully exempted from basic customs duty. CVD is also being reduced from 5 per cent to 1 per cent on such coal. This dispensation would be valid upto 31.3.2014

 Interest subvention scheme for providing short-term crop loans to farmers at 7 per cent interest per annum to be continued in 2012-13. Additional subvention of 3 per cent available for prompt paying farmers.

Industry Expectation-Unfulfilled

• Reduction of Excise duty on Pesticides to 4 per cent

• Reduction of services tax by 5 per cent from 10.30 per cent

• Non inclusion of agrochemicals in the list of Free Trade Agreements (FTAs)

• Permit tax free import of R&D equipments to the tune of 25 per cent of export earnings

• Samples of pesticides for free distribution should be exempt from levy of excise duty

• States should be prevailed upon not to levy VAT on agrochemicals

Budget Impact

Higher excise duty at 12 per cent would have negative impact on pesticides manufacturers

Outlook

Union Budget 2012-13 is mildly negative for pesticides sector, as increase in excise duty to 12 per cent from 10

per cent would make their products costlier. On the positive side, the hike in excise and service tax will benefit players with sizeable share of exports.  This is due to the fact that we expect upward revision in the duty draw back rates in June 2012, factoring in the higher incidence of excise tax and service tax.