Interim Budget for 2014 has brought along a major respite for the auto industry in India, which was reeling under pressure from all directions. High inflation, a groggy economy with an instable job market, high interest rates, poor infrastructure and sliding rupee – there didn’t appear to be much hope for the Indian auto industry, which only a few years back was growing at an incredible rate. After doing much to make things worse for the industry with its inconsistent and tax seeking policies, the government finally seems to have woken up to the obvious. Auto has been the sunshine industry for the Indian market in the past decade, and the government has finally offered some sops to help revive the dying sentiment within the auto fraternity.
Finance Minister P Chidambaram today announced a reduction in excise duty in the interim Budget. “To give relief to the automobile industry, which is registering unprecedented negative growth, I propose to reduce excise duty,” Chidambaram said. Here’s the list of changes made to the current tax structure to bring down the prices of automobiles
- Excise duty on small cars will come down to 8 percent from 12 percent
- Excise duty on scooters and motorcycles will come down to 8 percent from 12 percent
- Excise duty on commercial vehicles will come down to 8 per cent from 12 percent.
- Excise duty on SUVs will be reduced to 24 percent as against 30 per cent.
- Excise duty on big cars will now be 24 per cent as against 27 per cent earlier
- Excise duty on mid-sized cars will come down to 20 per cent from 24 percent.
The excise duty cut proposed in the interim budget will be applicable only up to June 20, 2014.
Commenting on the duty cuts proposed, Dr. Wilfried Aulbur, Managing Partner, Roland Berger Strategy Consultants said
“The reduction in excise duty gives the automotive industry a much needed relief after many quarters of demand side challenges.The action of government is welcome, but we reiterate the need to fix the basics of the Indian manufacturing model. We need good infrastructure (road, ports, etc.), reliable and competitively priced electricity and flexible labor laws that allow linkage between salary increases and productivity gains. Consistent policies must help to address the root causes of weak consumer sentiment such as high interest rates, stubbornly high inflation, and increasing fuel prices.”