MUMBAI, July 1: The prices of cosmetics and toiletry will marginally increase due to the new excise levy imposed by the government. The cosmetic and toiletry manufacturers will increase the prices of their products shortly following the government's decision to levy excise duty on 50 per cent of the maximum retail price (MRP) from Tuesday.

The decision to levy excise duty on MRP could cause a 20 per cent increase in their prices, said industry 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.

According to an industry spokesman, many companies have 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.

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.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.