The NDA government on Wednesday extended the concessional lower excise duty on cars, motorcycles and small commercial vehicles, besides several capital and consumer non-durable products, by six months to December 31. The move, welcomed by industry, has been done keeping in view that these sectors are still reeling under a slowdown and hence need the respite.
The UPA government had reduced the excise duty in its interim budget presented in February for a period of four months ending June 30. Announcing the extension of the concessional duty, finance minister Arun Jaitley said that since the Budget would be presented on July 10, the extension was warranted at this stage. “Considering the present situation in various sectors, the government has decided to extend the facility of this reduced excise duty to all those sections for a further period of six months, ie, they will continue till December 31, 2014,” Jaitley said in a brief statement outside his North Block office.
Continuation of the concessional duty will benefit the economy and therefore the revenue loss in the short term could
be made up in the long term, the minister said in reply to a question on the revenue implications of the decision.
Small cars, scooters, motorcycles and commercial vehicles will continue to attract 8% excise duty, mid-segment cars will bear 20% duty while sports utility vehicles and large cars will attract 24% duty for another six months. These products earlier attracted a levy 4-6 percentage points higher prior to February 17.
Wednesday’s decision to extend duty benefits comes in the wake of car sales having fallen for the second consecutive fiscal in 2013-14 with a drop of 4.65% on demand slowdown, though the market has started showing some improvement since May. Capital goods production, which expanded unexpectedly by 15.7% in April this year, had contracted in 18 of the 25 months through April, indicating the persistent weakness in the sector. Consumer goods production too had shrunk 5.1% in April, its seventh month of contraction on the trot.
In a late-evening statement, Jaitley said he expected industry to pass on the benefit of the duty concessions to consumers as well as show positive growth response in the coming months. The statement also said the idea was to provide a fillip to the capital goods and automobile sectors, given the government’s commitment to revive economic growth.
Vikram Kirloskar, president of the Society of Indian Automobile Manufacturers and