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AUTOMOBILES: FM maintains excise duty, industry expects boost in sales

Car and two-wheeler manufacturers have heaved a sigh of relief after Finance Minister Pranab Mukherjee proposed to maintain the excise duty at present levels while inviting companies to step up investments in the sector.

The Indian automotive market, the second-fastest growing in the world, recorded a 31 per cent jump in sales (14.82 million units) last year, leading market watchers to believe that excise duty could be restored to its earlier levels.

Excise duty on compact and large cars, utility vehicles, two-wheelers and CVs was raised by two per cent last year following robust growth in automotive sales in the previous year.

Keeping in mind the high base of last year, the Society of Indian Automobile Manufacturers expects sales to grow 15 per cent to more than 17 million units.

Maruti Suzuki Chairman R C Bhargava said, “It’s definitely a positive move by the finance minister to keep the excise duty unchanged. A rate increase, coupled with steeper interest rates and high inflation, would have hurt demand as there would have been far less disposable income in buyers’ hands.”

Mukherjee, in his speech said, he had chosen not to raise the excise duty as this would mean improved business margins resulting into better investment rates and also because of the upcoming goods and services tax.

The Union Budget has also brought relief to manufacturers of hybrid and electric vehicles through a cut in the Customs duty. Batteries imported by electric vehicle manufacturers for the replacement market will now be exempted from the basic Customs duty and a four per cent concessional rate of central excise duty will be charged.

Moreover, specified parts of hybrid vehicles are now exempted from the basic Customs duty and special countervailing duty. In addition, a concessional rate of five per cent excise duty is being prescribed to incentivise their domestic production.

Further, a National Mission for Hybrid and Electric Vehicles will be launched to encourage manufacturing and selling of the alternative fuel-based vehicles.