The government is likely to retain the tax sops provided to the auto sector in the Interim Budget early this year as a broader measure aimed at reversing the slowdown in the manufacturing sector.
The relief given to the automobile industry in form of lowered excise duty for small cars, two-wheelers and SUVs is likely to stay, an official told The Indian Express.
This would mean that the small cars, motorcycles, scooters and commercial vehicles will continue to be attract excise at 8 per cent from 12 per cent earlier while SUVs will be taxed at 24 per cent as against the earlier 30 per cent.
“The industry has been facing difficult times. The last two months have not been good for the industry. However, it is difficult to provide stimulus given the tough fiscal consolidation the government has to undertake. The best bet is to continue with the earlier sops,” the official said.
The tax relief will expire on June 30. On large and mid-segment cars, the excise duty was reduced from 27 per cent to 24 per cent; and from 24 per cent to 20 per cent. The Society of Indian Automobile Manufacturers (Siam) has, in its pre-Budget memorandum, also asked for retention of the tax sops. It has said excise duty rate on motor vehicles other than small cars should be capped at 24 per cent.
The automobile industry, as per Siam, contributes 25 per cent to the manufacturing GDP and comprises 18 per cent of the total excise collection. It employs 19.5 million people both directly and indirectly. However, low growth of export markets coupled with high duty on vehicles, high interest rates, different road taxes and has adversely impacted the industry.