Auto excise duty sops may not be extended

The government may not extend the reduced excise duty benefits to auto makers beyond this year, prompting car companies to increase prices more than expected in the new year.

The slowdown in the indirect tax collection is the main reason why the government will not be able to extend the duty benefit to auto makers, official sources have said.

The indirect tax collection grew by 5.6 per cent in the first seven months of the current financial year, indicating that the government could well miss the budget target of more than 20 per cent rise in collections this fiscal.

The government has managed to collect Rs 2.85 crore in indirect taxes during April-October. This is 45.7 per cent of the budget target of over Rs 6.24 lakh for the full fiscal. Excise duty collections, levied on manufactured goods at factory gate, declined by 1.2 per cent during the seven month-period to Rs 88,330 crore.

Although the vehicle firms have pleaded for an extension of the factory gate duty, Finance Minister Arun Jaitley has not given any commitment. To a question on whether the government is considering any such proposal, he merely said, “Wait till December 31.” The duty incentive expires on December 31.

Former 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 CV; 24 per cent from 30 for SUVs; 20 per cent for mid-sized cars from 24 and 24 per cent for large cars from the existing 27 per cent.