Union Budget 2009-10 has increased the excise duty incidence on cement products from 4% to 8%. But with strong boost on infrastructure and development projects, it has shown indirectly growth path for the Cement and Cement Product sectors. Some of the direct and indirect measures taken by the government relating to the Cement products sector were as follows
Budget Provisions
- The excise duty on goods in which not less than 25% by weight of fly ash or phospho-gypsum or both have been used, has been increased from 4% to 8%. In India, the frontline players use fly ash in excess of 25% by weight in asbestos cement roofints, and hence, Excise duty rate on Asbestos Sheets has been doubled to 8% from 4%.
- Excise Duty on solid or hollow building blocks, including aerated or cellular light weight concrete block and slabs, has been increased from 4% to 8%.
- Goods manufactured at the site of construction for use in construction work at such site have been fully exempted. This exemption was so far available only to goods in which more than 25% by weight of red mud, press mud or blast furnace slig or one or more of these materials, have been used. Now this exemption is available to all kinds of goods irrespective of use of these materials in such goods.
- Minimum Alternate Tax (MAT) was increased to 15% of book profits from10%. The period allowed carrying forward the tax credit under MAT to be extended from seven years to ten years.
- Allocation under Indira Awaas Yojana (IAY) was increased by 63% to Rs 8800 crore. Adding to this Allocation of Rs 2000 crore was also made for Rural Housing Fund (RFH) in National Housing Bank (NHB) to boost the resource base for refinancing operations in rural sector.
- New Scheme Called Pradhan Mantri Adarsh Gram Yojana (PMAGY) with an allocation of Rs 100 crore was launched on pilot basis for integrated development of 1000 vilages having population of Scheduled casts above 50%.
- Unchanged corporate tax rate whereas Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees has been completely abolished.
- Service provided in relation to transport of goods by rail will attract service tax.
Stocks to watch
Hyderabad Industries, Everest Industries, Visaka Industries, Ramco Industries
Budget Impact
Although the Budget has not addressed the cement or cement products industry, its emphasis on growth in the Infrastructure make the infrastructure related industries cheer. The cement product industry especially the asbestos cement manufacturers cheer on the impetus given to rural infrastructure – especially on the thrust given on rural housing by the government through Indira Awaas Yojana which is a positive sign.
On the flipside, the Union Budget has increased the Excise Duty from 4% to 8% on asbestos sheets. But increased allocations for various rural projects should help improve demand. At this point of time, the demand growth is critical, and if it can be ensured, the players are hopeful of passing on the rise in excise incidence. In this perspective, the Union Budget 2009-10 is neutral with positive bias for cement products sector.
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