Cigars, Cigarettes, Pan Masala, Gutkha… and Aerated Waters …'Ejusdem Generis'?
MAYBE you would like to have a Coke or Pepsi with a cigar, cigarette, Pan Masala or Gutkha, but can you group them all together?
In his Budget Speech 2014, the Finance Minister said, …..
While undertaking all these measures, I also need to mobilize resources. Accordingly, I propose to increase the specific excise duty on cigarettes ….. Similar increases are proposed on cigars, cheroots and cigarillos. Likewise, the excise duty is being increased … on pan masala, ….on unmanufactured tobacco and …..on gutkha and chewing tobacco. I also propose to levy an additional duty of excise at 5 percent on aerated waters containing added sugar. These are healthy measures and I hope everyone would welcome them from the point of view of human and fiscal health.
So he categorised aerated waters along with cigars and pan masala as unhealthy products.
Actually, the tobacco products were grouped together in the 2005 Budget for imposition of an additional excise duty by the seventh schedule to the Finance Act 2005. In the 2014 budget, the Finance Minister just added aerated waters into that group (in the seventh schedule to the Finance Act 2005) to collect an extra 5 per cent duty.
The effervescent industry was not so much up against the extra levy, as against the categorisation.
Writing in our columns in February 2015, Mr.Rishabh Kumar Sawansukha , stated,
"Classifying aerated beverages with added Sugar in category of proclaimed hazardous products like Tobacco and Pan masala is a great injustice and insensitive approach to the fact that non-alcoholic beverage do not cause any externalities.
Indian Council of Medical research has observed that per capital consumption of sweetened beverage in India is too low and insignificant to warrant any health concern. Report issued by Oxford Economics, International Tax & Investment Centre in February 2013 has said that Non Alcoholic Beverage neither cause any externalities nor a luxury goods.
Drinks classified under central excise tariff 2202 10 also includes "Lemonades" which provide instant source of energy and hydration needs of masses with a hygienic and affordable drink. Targeting this segment for wrong reasons will not only create adversaries for Industry but also allow un-organized and spurious drink manufacturer to fill the vacuum. It is important to note that adverse impact on human health may be caused by substandard and poor quality products flooded in market.
He suggested , "Remove Non Alcoholic Aerated Beverages from the 7th Schedule of Finance Act 2005 and any change in the duty rate should be brought by amending Central Excise Tariff."
Government heard him. In the Budget 2015, ‘aerated waters' was removed from the seventh schedule to the Finance Act 2005. But what happened to the 5% additional duty. The Finance Minister enhanced the duty on aerated waters from 12% to 18%. (Mr. Rishab Kumar had actually suggested a 16% or 17% basic duty instead of the 5% additional duty along with tobacco.). So aerated waters got out of the bad company.
Well all this involves a lot of legal jugglery.
1. Clause 184 of the Finance Bill 2015 proposed that the entries relating to sub-heading 2202 10 in the Seventh Schedule in the Finance Act 2005, be omitted. (This is the 5% AED on aerated waters; but this would come into force only after enactment of the Finance Bill 2015.)
2. The duty on aerated waters was increased from 12% to 18% in the 2015 budget and this had immediate effect. That would make the duty 18%+5% AED
3. So, the Government gave an exemption from 5% AED by amending Notification No. 6/2005-CE, by Notification 9/2015 - CE dated 1.3.2015, which made the effective rate of AED as ‘nil'. This was to be valid till enactment of the Finance Bill 2015.
4. After the Finance Bill 2015, was enacted, this exemption was to be withdrawn as now there is no Additional Duty on aerated waters.
5. Though the Finance Act 2015 came into existence on 14.5.2015, they amended this notification only on 22.05.2015.
Though there is a delay of 8 days, there is no damage as any way from 14.5.2015, there is no additional duty on aerated waters and before that from 1.3.2015, it was exempted. It is only a technical correction - if they had not done this they would be exempting additional duty which is not leviable at all.
This is the story of the latest Notification No. 29/2015 - CE, which in one line stipulates, "In the said notification, in the Table, S. No. 1A and the entries relating thereto shall be omitted."
Notification No. , Dated: May 22, 2015