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What's cheaper, what's dearer

Pallavi Srivastava and Manu Kaushik     March 1, 2008

Cars: Small is even bigger. The excise duty on small cars has been cut from 16 to 12 per cent. If the entire benefit is passed on to consumers, it will mean an effective price-cut between Rs 7,000 and Rs 20,000, depending on the vehicle and trim level. That’s not all. Excise duty on hybrid cars has also been cut from 24 to 14 per cent.

Two-/Three-wheelers: This segment also moves in top gear with excise duties cut from 16 to 12 per cent. This could imply price drops between Rs 500 and Rs 1,000 for two-wheelers, and between Rs 1,000 and Rs 2,000 for three-wheelers.

Set-top boxes: The pleasures of television have just become more affordable thanks to cheaper set-top boxes.

This has become possible with specified parts of set-top boxes getting exemption from customs duty.

Fertilisers: If the debt waiver, customs duty sop on domestic fertiliser production and fertiliser subsidy at Rs 31,000 crore were not enough, the Finance Minister has also laid the ground for cheaper fertilisers for farmers by reducing customs duty on crude and unrefined sulphur as also phosphoric acid used for making the agri-nutrients.

Medicines: Healthcare becomes more affordable now with a reduction in customs duty on six specified drugs and bulk drugs.
The Budget also slashes by half the excise duty at 8 per cent on drug formulations and exempting anti-AIDS drug Atazanavir and bulk drug for its manufacture.

Consumer goods: A 2 per cent general cut in excise duty is likely to spur buoyancy for the consumer durables. A range of products—washing machines, refrigerators, air-conditioners and other durables—are all set to become more affordable to consumers.

Specific packaged food: The food on the breakfast table has become more affordable. Packaged coconut water, tea, coffee mixes and puffed rice will cost less as the Budget has either exempted or reduced excise duties on a number of processed food items.

Wireless data cards: Excise duties on wireless data cards have been reduced from 16 per cent to nil. These cards that fit into laptop PCMCIA or USB slots will see prices drop considerably.

Convergence devices: Excise duties on convergence devices— specifically portable digital entertainment devices—have been cut from 10 to 5 per cent. This also means the iPod has just become slightly cheaper.


Cigarettes: The FM does not want to differentiate between filter and plain cigarettes. Ergo, for non-filter cigarettes not exceeding 60-mm in length, the excise duty has been increased nearly five times to Rs 819 per 1,000 cigarettes from prevailing Rs 168.
But for the longer cigarettes, the excise duty has been increased by over two-and-a-half times to Rs 1,323 from Rs 546 for every 1,000 sticks.

Cement: The real estate is just going to cost a tad more. Bulk cement will now attract excise duty of Rs 400 per metric tonne or 14 per cent ad valorem, whichever is higher. Cement clinkers will also be liable to excise duty of Rs 450 per metric tonne.

Packaged software: The Budget surely took the software industry by surprise with an increase in excise duty on packaged and customised software from 8 to 12 per cent. Expect the new original software to be dearer by 4 per cent. While some see it as a move that will act as a deterrent to the anti-piracy campaigns of leading software makers, it will definitely increase the IT budgets of corporates.

Commodities transaction: With commodities trading ready to take off in a big way in the country, the Budget has introduced Commodities Transaction Tax along the lines of Securities Transaction Tax.

ULIPs: Asset management service provided under ULIP has been brought under the service tax net. The objective: to bring it at par with asset management service provided under mutual funds. The result: it is likely to add to the ULIP costs.

Mobile phones: The FM removed duty on polyester filament yarn and shifted the levy to cellular mobile phones. As a result, mobile phone users would now have to dole out more money to buy new handsets thanks to this proposed levy of 1 per cent on handsets. This is likely to result in a price hike, albeit marginal.

Naphtha: A 5 per cent import duty on naphtha has been introduced in the Budget. The new tariff will apply only to companies importing naphtha for use in polymer units and not for fertiliser production. Currently, only two companies, Reliance Industries Ltd and Haldia Petrochemicals, are major naphtha importers for petrochemical plants, preferring to tap global markets rather than buy expensive domestic supplies. The move is likely to benefit oil refineries selling the product.

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