Double whammy compounds Himachal cement units’ woes

Ambika Sharma

Tribune News Service

Solan, September 20

Cement manufacturers of Himachal Pradesh are in a quandary. While the soaring high-speed diesel price is squeezing their margins, the state government’s refusal to continue reimbursing levies on diesel through ‘Form-C’ has put them in a tight spot.  

The ‘Form-C’ for diesel is being issued by several state governments to the industry to offset the state-level levies (value-added tax) on the fuel. While some states such as Himachal Pradesh say the compensation is irrelevant in the new Goods and Services Tax (GST) regime, the industry is adamant on the ground that diesel is outside the ambit of the GST.

Diesel is used by Himachal Pradesh-based cement companies such as Ambuja Cements Ltd, ACC and Ultratech for various manufacturing processes, including mining, power generation and clinker activities.

As Himachal Pradesh do not have sufficient diesel to cater to the demand of industrial consumers, the industry imports the fuel from neighbouring states at the market rate including VAT, which makes it costlier by about 17 per cent. Earlier, the industrial consumer used to get the reimbursement through the ‘Form-C’. After the rollout of the GST, the state government stopped issuing the ‘Form-C’, which, the industry claims, is mandatory under the Central Sales Tax rules, and it is still applicable because the fuel is outside the purview of the GST. 

A senior executive working for a cement major said they were incurring losses on a daily basis as they were forced to buy diesel from Haryana at market rates along with 17.22 per cent VAT. As diesel prices have also jumped significantly in last few months, the non-issuance of ‘Form-C’ is adding to the manufacturing cost, he said. The industry require about 30-35 barrels (about 5,560 litres) diesel per month.

Additional Excise and Taxation Commissioner Sanjay Bhardwaj said the government had received representations from various cement manufacturers such as ACL and Ultra Tech. The issue would be put up before the state government shortly, he said. 

As the entire diesel for industrial consumption would be purchased from outside Himachal Pradesh, it would cause a revenue loss to the state. Therefore, all aspects would be weighted before the state government would take a decision, he said.

Manufacturers, however, said the state government should restore the ‘Form-C’ in the light of the apex court’s recent decision that allowed purchase of diesel for use in the mining activities at the rate of  2 per cent. The High Courts of Chhattisgarh, Rajasthan, Punjab and Haryana have allowed assesses to purchase diesel against the ‘Form-C’, the manufacturers said.