Earlier this year, the Interim Budget announced by former Finance Minister, Mr. P. Chidambaram, saw the government announcing tax cuts for cars, motorbikes as well as commercial vehicles. This duty cut had resulted in a significant drop in prices of cars across almost every segment, which translated into better sales in the last few months. Now though, the deadline for the tax sops under the Interim Budget is just around the corner and if the duty cut isn’t extended, prices of cars across all segments might be hiked by four to six per cent.
Post the announcement of the Interim Budget, excise duty on small cars, motorcycles, scooters and commercial vehicles was reduced from 12 per cent to eight per cent while that on SUVs was cut from 30 per cent to 24 per cent. Subsequently, a majority of car manufacturers passed these tax benefits on to the customers by announcing a cut in prices.
Talking to PTI, Ajay Raghuvanshi, VP, sales and marketing, Nissan Motor India, said, “We certainly hope that the government of India will give us an opportunity to continue keeping our customers happy”.
A Honda Cars India spokesperson said: "We will have to follow the excise duty structure applicable during that period. The industry has already made its recommendations to the ministry through SIAM.”
On June 16, members of SIAM met with Commerce Minister Nirmala Sitharaman asking for a continuation of the excise duty cuts. The new Budget for the current fiscal year will be announced next month and the industry is waiting with bated breath to see whether the excise duty cuts are extended.
The reduction in excise duty greatly benefited the ailing auto sector, which saw a streak of negative growth for the first time since 2002, due to rising production costs and a depreciating rupee. Now though, if the government decides not to continue the tax sops, car manufacturers will be left with no option other than increase their car prices again.