The Telegraph
Since 1st March, 1999
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Car makers look for duty propellers

New Delhi, Feb 23: Carmakers are preparing to roll out a host of new models within weeks of the budget for 2003-04 in which they expect to profit from a rash of duty cuts.

Ford will launch multi-activity car Fusion; Maruti will launch sports utility Grand Vitara, while Hyundai will pull the wraps off its promised small car Getz even as General Motors readies to launch its popular multi-utility vehicle, the Isuzu Panther.

Skoda India will also launch their top-of-the-line vehicles —Superb and Laurin and Klement if the finance ministry agrees to let them import completely built units (CBUs) at cheaper, which however is unlikely.

Carmakers, who have witnessed a surge in demand in the second half of this fiscal, are looking forward to cuts in customs and excise duties.

Customs duty on auto kits and components are expected to fall from 30 per cent to 25 per cent, with a similar drop in countervailing duties. Excise rates are to come down from a punishing 32 per cent to a special rate of 28 per cent, if not to the normal upper excise slab of 24 per cent.

The net result will be that all taxes and levies paid on automobiles, which today translate to about 121 per cent on the basic price of a car, will fall to about 110-116 per cent, depending on the level of indigenisation of the car.

Cars, in general, will be cheaper. “That could drive sales up and expand the market for everyone,” said Vinay Dikshit, vice president of General Motors.

“Even if the fall in taxes is just 5 per cent, it means a hell of a lot in terms of total money saved which could be as much as Rs 20,000 on a Rs 4 lakh tag car,” explained auto-analyst Murad Ali Baig.

The real game will be in terms of component duties. The customs rate is set to come down from 30 to 25 per cent mainly bacause India lost a trade dispute case at the International Court of Justice. With customs coming down, CVD is set to come down too which will lower the overall import prices of components and kits cheaper.

However, carmakers like Skoda India who want to bring in CBUs may not find the going much cheaper. The duty fall may be minimal.

Already the finance and commerce ministries are gearing up to re-define what a CBU means. It could in the future mean any car which has the following: engine, gear box, propeller shaft, axles, seats, instrument cluster or suspensions installed in the chassis or body assembly of a vehicle.

Secondly, if the value addition to the import value of the vehicle is less than 30 per cent, then these vehicles shall be deemed as a completely built unit for taxation purposes. Customs alone on CBUs are a heavy 60 per cent. There are special duties and CVD on these vehicles.

No budget-day blocks

The government has lifted budget-day restrictions on clearance of manufactured goods, including those for exporters and importers, by amending the Central Excise Rules of 2002.

“February 28 this year will be the first when manufacturers, importers and exporters will conduct normal activities. The unhindered economic activity is expected to help growth,” an official release said.

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