Impact of Corrugating duty on Corrugated Boxes

Impact of Corrugating duty on Corrugated Boxes

Prepared By:

CA Pradeep Jain

Ghanshyam Chaudhary

Earlier to this budget, the corrugated boxes were chargeable to Central Excise duty @ 8 %. Most of the units producing corrugated boxes were operating under SSI exemption Notification no. 8/2003-CE (NT) dated 01.03.2003.

But this year budget has amended the aforesaid position. The levy of duty has been lowered to 4%. The Notification no. 04/2006–C.E. dated 01.03.2006 has been amended by Notification no. 10/2010-C.E. dated February 27. 20101. The Entry at serial number 96E has been inserted which reads as follows:-

*Entry no.*	*Tariff heading*	*Goods*	*Rate Excise Duty*	*Condition no.*
96E	481910	Cartons, boxes and cases, of corrugated paper or paperboard	4%	12

The condition no.12 is attached to above serial number. The condition is reproduced below:-

*Condition no.*	*Condition*
12	“The exemption shall be applicable to units manufacturing cartons, boxes or cases, as may be, starting from stage of brought out Kraft paper and not having the facility to manufacture Kraft paper in the same factory.”

Thus, the corrugated boxes and cases of paper and paperboard will attract duty @ 4%. The condition underlines that the exemption will be available to the units who are engaged in manufacture of boxes only and purchase Kraft paper for the same. Hence it is meant for small scale manufacturers who are engaged in manufacture of corrugated boxes only. This is not meant for large scale manufacturers who are manufacturing Kraft paper as well as corrugated boxes. This means that the Government does not want to lose the duty on Kraft papers. The large scale manufacturers have to pay duty @ 10% whether they clear the corrugated boxes or Kraft papers.

The outcome of the same will be that the small scale manufacturer of corrugated boxes will take the credit of 10% on Kraft paper and they will pay the duty @ 4%. Thus, they need not to pay the PLA and extra credit will be available to them. This will force them to forgo the SSI Exemption granted under Notification No 8/2003-CE and pay the duty from day one. Moreover, they will be able to pass on the CEVAT credit to industrial customers.

Second possible outcome of this levy will be that the Kraft paper manufacturer will separate their manufacturing activity of corrugated boxes. Otherwise nobody will purchase the corrugated boxes from them.

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Impact of Corrugating duty on Corrugated Boxes

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