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Govt ends pre-budget jitters, extends excise relief for automobiles, consumer goods

New Delhi, Jun 25 (PTI): Cars, SUVs, two-wheelers and consumer durables will continue to enjoy up to December 31 the excise duty cuts granted in February’s interim budget by the United Progressive Alliance government to help tackle a demand slump.

Finance Minister Arun Jaitley said the concessions, which were to have expired after June 30, have been extended. The Bharatiya Janata Party government is scheduled to present the full budget on July 10.

“Considering the present situation in various sectors, the government today 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,” he told reporters here.

Excise duty on small cars, scooters, motorcycles and commercial vehicles will continue at eight per cent from 12 per cent previously. The factory gate duty on SUVs stands at the reduced rate of 24 per cent as against 30 per cent.

The duty on large cars will continue at 24 per cent compared with 27 per cent earlier, while the duty on mid-sized cars will stand at 20 per cent from 24 per cent.

Capital goods and consumer durables will continue to attract a lower duty of 10 per cent as against the pre-budget rate of 12 per cent.

Asked about the loss of revenue caused by the extension of these concessions, Jaitley said the short-term loss would be offset by the gains for the economy in the long run.

Jaitley said, “We expect it will benefit the economy. So if it benefits the economy, short-term loss of revenue” should not be a concern.

He said the decision on extending the concession, which is valid until June 30, could not have waited till the Budget.

A notification in this regard will be issued later in the day, Jaitley said.

Most carmakers had passed on the benefit of excise duty reduction to customers by cutting prices. The auto industry body had been lobbying for extension of the reduced rates.

”It will be good for the auto industry. The momentum that has been built in last few weeks will continue,” said Mayank Pareek, Maruti Suzuki India’s Chief Operating Officer (Marketing & Sales).

Car sales grew 3.08 per cent in May, snapping two successive months of declines, raising hopes the industry may be coming out of a prolonged market slump.

Automobile sales in India fell for the second consecutive year in 2013-14 and were 4.65 per cent lower at 17,86,899 units. In 2012-13, car sales fell 6.69 per cent, the first drop in a decade.

The Consumer Electronics & Appliances Manufacturers Association, too, had demanded extension of the duty cut.

In the Interim Budget, then Finance Minister P Chidambaram reduced the duty with the aim of boosting the manufacturing sector, saying the “economic situation demands some interventions that cannot wait for the regular Budget”.

He had said the rates could be reviewed at the time of the regular Budget.

Honda Cars India’s 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.”

He also said the announcement from the government clears the uncertainty of what will happen after June 30 deadline ”and is a much needed support to the industry from the new government”.

General Motors India Vice-President P Balendran said: “We hope government will extend it for the full year in the Budget as the sector continues to be sluggish. We also expect government to announce other measures in the Budget to revive the growth.”

Society of Indian Automobile Manufacturers (SIAM) Executive Director Vishnu Mathur termed the development as “a big relief for the auto industry,”.

A Tata Motors spokesperson said: “The excise reduction was a positive step for the automobile industry and we are glad to see it extended as it will help the industry while we await other significant policy decisions to revive the economy.”


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