New Delhi, June 25: The government today extended the excise duty concessions to automobiles, capital goods and consumer durables by another six months till December.
Reductions were made in the duties on cars, SUVs and two-wheelers as well as consumer durables and capital goods in February’s interim budget to help tackle a demand slump.
Finance minister Arun Jaitley said the extension was announced before the budget on July 10 — the concessions were valid till this month — as factories would have been hit by 10 days of higher duties.
“Considering the present situation in various sectors, the government today decided to extend the facility of this reduced excise duty to all those sections for a further period of six months, that is, they will continue till December 31, 2014,” he told reporters here.
The finance ministry said tax losses on account of the move were minor to be recouped by higher revenues from an expanding economy.
Annual car sales in India had declined for the first time in 11 years in 2013, posting a 9.59 per cent drop.
A finance ministry statement said, “However, despite duty cuts, auto-sales have not picked up during March-April, 2014, although some positive signs could be seen from the sales figures of May 2014. Sales of capital goods and consumer goods continue to be sluggish.”
Auto company executives said the government would have to do much more than merely extending the sops.
Their wish list includes sectoral packages, interest reduction, extension of the duty cuts for the full year and bringing in the goods and services tax (GST) to help cut costs.
General Motors India vice-president P. Balendran said, “We hope the government will extend it for the full financial year in the budget.”
Others feel a more permanent solution needs to be found as some automobile segments were suffering more than others such as commercial vehicles.
“We would like the government to take a long-term view to have a unified excise duty structure,” said Sumit Sawhney, country CEO and managing director for Renault India.
However, analysts refused to forecast the impact of the extension of the benefits. “In the next six months, things will further improve,” said Sugata Sen deputy director-general of Society of Indian Automobile Manufacturers.
In the short term, the industry is confident that the government’s move would help the sector.
“It will be good for the auto industry. The momentum that has been built in the last few weeks will continue,” Maruti Suzuki India chief operating officer (marketing and sales) Mayank Pareek said.
Honda Cars India senior vice-president (marketing & sales) Jnaneswar Sen said the announcement cleared the uncertainty of what will happen after the June 30 deadline.
Commenting on the extension, Toyota Kirloskar Motor vice-chairman and whole-time director Shekar Viswanathan said: “The auto industry is going through difficult times and we expect the government would take cognisance of this when coming out with the new financial bill (budget) in July 2014.”
India Ratings & Research in a research note said the excise duty cut on consumer durables was unlikely to boost their demand as high interest rates and high prices continued to plague the sector.
However, the industry welcomed the news.
“The extension of duty would send a positive sentiment. However, poor monsoon could impact sales in semi-urban and rural areas,” said Suresh Khanna, secretary-general of the Consumer Electronics and Appliances Manufacturers Association.
“Its an encouragement for the industry and it would help to continue the growth momentum,” said Kamal Nandi, Godrej Appliances executive vice-president (sales & marketing).
Whirlpool of India vice- president Shantanu Das Gupta said: “The extension is good news for the industry as it partially mitigates the cost pressures the industry faces.”