MUMBAI, June 20: The announcement to levy excise duty on cosmetics and toiletries on the maximum retail price (MRP) from July 1 will have a major impact on the bottomlines of Pond's India, Lakme-Lever and Hindustan Lever. Currently, the excise duty on cosmetics & toiletries is 30 per cent. The newly imposed excise duty would be calculated at 50 per cent of the MRP declared on the notified cosmetics and toilet preparations. These include talcs, colour cosmetics and shampoos while toothpastes and toothpowders have been spared.

The excise duty on cosmetics and toiletries was progressively brought down from 120 per cent to 30 per cent in 1997. This has resulted in lower consumer prices which has made these products more affordable to consumers leading to growth in demand.

The Rs 1,200-crore cosmetics and toiletries industries is growing at 25 per cent as against a marginal five per cent last year. This growth is likely to slow down with the levying of the excise duty on MRP. A price hike in the range of 6-8 per cent is necessary to pass on the impact to the consumer, said analysts. The impact on HLL's profit before tax, if the company does not pass on the cost, will be to the tune of Rs 16-17 crore. In Pond's case, the impact will be far more severe at around Rs 18 crore on its profit before tax. The notification, which was issued on Thursday, was first proposed by finance minister P Chidambaram in the 1997-98 budget. However, a broad picture on the products where the excise duty will be applicable has only been made available now.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.