Automobile industry fears a possible rate hike

The automobile industry in India has suspected that the Budget-2010 may make buying new cars in India more expensive as a result of a possible increase in tax rates. Industry officials on highest level apprehended that government of India may curtail a significant part of the stimulus package which was provided at the time of global recession.

Montek Singh Ahluwalia, deputy chairman of country’s planning commission said in a interview given to a media group that as the economy is again on its growth path , now the government should think of unwinding the stimulus package. Government of India provided a stimulus package to the auto Industry in year 2008 with decreasing the duty rate by 4% for both small and big cars.

The duty on big cars decreased to 20% from 24% with defining the big cars as a car which is longer then 4 meter and has a engine capacity of more then 1.2 litre (for petrol engines) and 1.5 litre ( for diesel engines ).  This duty decrease made big cars cheaper by Rs 12,000 to Rs 1 lakh..

A possible roll-back of duty cut will make many upcoming cars in India expensive including Ford Figo, Volkswagen Polo, Tata Aria, Toyota Etios and Skoda Yeti. While on the other hand many existing popular cars in India will also become costlier including the highest selling car models like Maruti Alto, Maruti Wagon R and Hyundai Santro Xing.

However, the auto industry is expecting some relief in terms of a reduction in the specific excise duty applied on cars and SUV's with an engine size above 2,000 cc which cut down to Rs15,000 from Rs 20,000 in year 2009 Budget.

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