Auto, consumer goods duty cut extended to Dec 31

24% duty on large cars will continue

With the aim of reviving the economy, the government on Wednesday extended the excise duty concession on capital goods and automobiles by six months to December 31, a move hailed by the industry.

The excise duty on cars, SUVs and two-wheelers as well as consumer durables and capital goods was cut in the Interim Budget in February to help tide over a demand slump.

The concessions, which brought down prices of vehicles and consumer durables, were valid till June 30. “Considering the present situation in various sectors, the government has decided to extend the facility of this reduced excise duty to all those sections for a further period of six months, i.e., they will continue till December 31, 2014,”Finance Minister Arun Jaitley said.

He said the government expects industry to show positive results in coming months and hoped “the benefit of these duty concessions will be passed on to the consumers at large”.

Most carmakers and consumer durable firms had already passed on the benefits to customers. The Finance Ministry said the government extended the duty concession "given its commitment to revive economic growth" and to provide a fillip to the capital goods and automobile sectors.

Companies across the two sectors, including Maruti Suzuki, Honda Cars India, General Motors, LG India, Godrej Appliances and Whirlpool, felt the government's move gives a much-needed stimulus to the industry as it leads up to the festive season. Excise duty on small cars, scooters, motorcycles and commercial vehicles will continue at 8 per cent from 12 per cent earlier; on SUVs, it stands at the reduced rate of 24 per cent as against 30 per cent. Duty on large cars will continue at 24 per cent compared with 27 per cent earlier, while the duty on midsized cars will be 20 per cent (24 per cent). 

The auto industry welcomed the move saying it would help the sector overcome the prolonged demand slump. “It will be good for the auto industry. The momentum that has been built in last few weeks will continue,” Maruti Suzuki India Chief Operating Officer (Marketing and Sales) Mayank Pareek said.

Honda Cars India Senior Vice-President (Marketing & Sales) Jnaneswar Sen said: “The industry has had a tough couple of years. We had just started seeing some rays of hope last month and with this extension of the reduced excise rates, we can look forward to building the momentum.”