Reduced excise duty benefit extended; SIAM thanks government

A big relief to Indian car buyers. Excise duty cut implemented by the UPA government in the Interim Budget has been extended till December 31, 2014. The excise duty cut which was announced by then Finance Minister P. Chidambaram in February was set to expire on June 30.

Finance Minister Arun Jaitley said, “Extension of excise duty cut to reduce revenue in short term, but benefit economy in long run.” He further added "Any loss from revenue can be made up in economy in long term. I hope economy benefits from extension of excise duty cuts." After making the announcement Mr. Jaitley said, "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."  Mr Jaitley also said the extension is expected to help India's ailing economy to get some thrust.

Following the good news of extension of excise cut benefit, auto shares including Maruti Suzuki and Tata Motors surge-up to 3 per cent. The reduction of excise duty cut will affect the sales of SUVs, cars and two wheelers in a positive way. Now, the prices of the vehicles falling in the aforementioned categories will continue to have a lower price tag atleast for the next six months.

Mr. Vikram Kirloskar, President, SIAM was overwhelmed with the announcement and thanked the NDA government for taking such prompt decision which highlights their concerns not only for automotive sector but on the manufacturing industry as a whole.

“We are certain that the extension of the reduced Excise Duty will contribute positively toimprove the buyer sentiment and would help in bringing about a sustained recovery in the automotive industry that has been languishing for over two years now. This will go a long way in bringing back growth, investments in the industry as well as encourage higher employment.”

“On behalf of the entire automotive sector, I would like to thank Government for their very timely and supportive role”, Mr. Kirloskar added.

Excise duty for small cars (under 4m), which have the largest share in sales, continues to be 8 per cent instead of the pre-interim budget's 12 per cent. The announcement brings a sigh of relief for SUV lovers too as the excise duty is kept intact at 24 per cent which would have been otherwise 30 per cent from July onwards. Excise duty on mid-size cars will also attract 20 per cent from 24 per cent while the larger cars attract an excise duty of 24 per cent as compared with 27 per cent in the pre-interim budget. The excise duty on two-wheelers advocates 8 per cent, which was earlier 12 per cent. The Indian auto sector has witnessed continuous fall from the last couple of years. In the fiscal year 2013-14, auto sector sales dropped by 4.65 per cent at 17,86,899 units as compared to 18,74,055 units in the last fiscal. Moreover, the car sales fell by 6.69 per cent in the financial year 2012-13 which was the first decline in a decade.

It is expected that the Narendra Modi government will bring more reforms and initiatives to revive the falling economy and especially, the plunging Indian auto sector.