Government extends excise duty concession on cars by 6 months

The Government of India has announced that it will extend the excise duty concession on vehicles by six months till December 31, 2014. Vehicle manufacturers are expected to continue passing on the benefits of the reduced rate of duty to their customers.

Earlier this year, in the interim budget for 2014, the Government of India had slashed the rates of excise duty on vehicles. The duty on small cars was slashed from 12% to 8%, medium-sized cars from 24% to 20%, large cars from 27% to 24%, SUVs from 30% to 24% and motorcycles and scooters from 12% to 8%. This step was taken to revive the automobile market in the country which was going through the worst slump in its history.

Following this, many manufacturers passed on the benefits of the reduction to the customers by slashing the prices of their products. However, this reduction in the rate of excise duty would have been applicable only till the June 30, 2014 after which, according to precedence and law, the duty structure valid before the interim budget would prevail. This would mean prices of cars and bikes could rise by 4.5-5% and those of SUVs by 6%, resulting in a drop in demand.

The Society of Automobile Manufacturers has welcomed the extension of the concession since it believes that it will contribute positively to improve buyer sentiment and help in bringing a sustained recovery in the automotive industry. Car manufacturers will be hoping that the Government announces additional measures to revive growth in the Union Budget on July 10, 2014.