MUMBAI, July 1: The government's decision to levy excise duty on 50 per cent of the maximum retail price (MRP) on cosmetic and toiletry products from Tuesday has forced the manufacturers to increase the prices of their products shortly.

According to an HLL spokesman, the company has taken steps to neutralise the impact on the consumer. These include cost cutting methods to improve productivity.

Stockists in Mumbai said that the price hike, however, will take a few weeks as the old stocks are yet to be cleared and the new labels attached.Among other major cosmetics and toiletries makers, Lakme has also chalked out plans to increase its prices. However, it will take some time to clear old stocks to effect the hike, said managing director Anil Chopra.

In the case of colour cosmetics, the rate of clearing old stocks is slow and thus the price hike in the case of cosmetic manufacturers will be delayed.

According to a spokesperson of Procter & Gamble India, the company has not yet taken a decision on this issue.

While welcoming the government's decision, he said that the abatement of 50 per cent on MRP is not sufficient and this should be increased to 60 per cent on MRP.

He added that the government should not have exempted shampoo sachets of 10 ml or less from this provision as this goes against simplification and standardisation objective of MRP tax.

Manufacturers are also demanding a reduction in the maximum limit of excise duty on cosmetics and toiletries to 18 per cent from the current level of 30 per cent. This is to minimise the impact of excise levied on MRP and to enable companies to hold on the price line and improve demand, industry sources said.

Charging excise on MRP is a precursor to value-added tax. The excise duty was successively brought down to 30 per cent from 120 per cent over a period of time.

This was aimed at increasing demand and generate revenue. Industry sources said that if excise was to come down to 18 per cent, it would not only boost revenue generation for the government but also insulate manufacturers' margins.

The recent decision to levy excise duty on MRP could trigger a spurt in prices upto 20 per cent, said sources. The products covered under the new scheme are perfumes, toiletries, cosmetics and make-up preparation for skin and hair, shampoos, deodorants, bath oils and other bath preparations.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.