Excise duty extension to be mooted for auto

The excise duty cut for the automobile sector in the interim Budget this year could help it a little as latest data from the Society of Indian Automobile Manufacturers (SIAM) shows that domestic passenger car sales in April skidded once again. 

Precisely why Finance Ministry officials are gearing up to suggest that the new government extend the duty reduction beyond June 30.

In their agenda for the new government, ministry officials, among other boosters for sectors under stress, are also listing various automobile sector woes which may have aggravated due to slower overall economic growth, high inflation, high fuel prices and high interest rates.

“An analysis is being done on this as well as other indirect tax proposals which could provide relief for domestic manufacturers,” a ministry official said.

In SIAM’s latest data released late last week, domestic passenger car sales in April stood at 135,433 units compared to 150,737 units a year earlier. This is the biggest decline since May 2013, when car sales dropped 11.7 per cent.

To provide relief to the automobile sector, Finance Minister P Chidambaram, in the Interim Budget this year had cut excise duty to 8 per cent from 12 for small cars, scooters, motorcycles and commercial vehicles; 24 per cent from 30 for SUVs; 20 per cent for midsized cars from 24 earlier; and 24 per cent for large cars from the existing 27 per cent.

This burden was passed on by vehicle companies to the customers but the fall in overall sentiment could be because of persistent economic slowdown in the country and forecast of deficient monsoon.

“There is a need to extend the duty cut beyond June 30,” the official said, but added that everything depends on the new government which takes over after the elections.The February 17 duty reduction was announced only for the period upto June 30 since it was only an interim budget.

The new government, which takes over this month, will likely present the Budget in late June or early July. 

Analysts believe that a greater push is in the offing for the automobile industry.