ISTMA has pleaded with the government that the state excise duty on alcohol- based toiletries should be on par with other toiletries. The government had reduced this to 50 per cent in 1998. However, ISTMA feels that this is still on the higher side."With the government's decision to subject alcohol-based toiletries to MRP-based assessment, and with no Cenvat credit being allowed, as the finished product attracts state excise duty, the effective duty will be much higher, thus restricting the growth of the industry," the Association said in a note to the ministry of finance.

The reduction in excise duties on toilet preparation products from 120 per cent to 30 per cent during the period 1993-94 to 1997-98, has led to category growth of nearly 30 per cent per annum, ISTMA said. However, since the excise duty has been pegged at 30 per cent since 1997-98, the category growth has slipped to 15 per cent.

In the Union Budget 2000-2001, the excise duty was fixed at 32 per cent (16 per cent Cenvat plus 16 per cent special excise duty). According to ISTMA, "there is not a single fast moving consumer goods (FMCG) category in the 32 per cent excise bracket except toiletries." The Association added, "Toilet preparations are highly price sensitive. The excise duty including the special excise duty at 32 per cent based on MRP constitutes a significant portion of the cost of product, and this category is sensitive to excise duty changes."

ISTMA said that removal of the special excise duty will stimulate a volumes growth, leading to higher excise revenue collections. "This has been well established in the past, where the stagnating industry registered significant growth due to reduction in excise duty, leading to higher revenue realisation," it pointed out.

The total excise duty rate of 32 per cent (based on MRP) for toilet preparations continues to be the highest for any FMCG product. ISTMA has thus requested for a removal of the special excise duty on toilet preparations which would lead to a reduction in excise duty from 32 per cent to 16 per cent.

ISTMA has requested for the following: n Levy of excise duty of 16 per cent plus special excise duty of 16 per cent, with Cenvat credit permitted with abatements at 50 per cent as applicable to non-alcohol based toiletries. Or,n Levy of excise duty of 16 per cent plus a special excise duty of eight per cent in case no Modvat credit is allowed with abatements at 50 per cent for MRP based excise valuation as applicable to non-alcohol based toiletries.