Excise duty cuts on consumer durables, cars end today

The duty cuts have hit the government's collections by about Rs 2,500 crore

Battling to meet the Budget target of reining in the Centre’s fiscal deficit at 4.1 per cent of gross domestic product, the finance ministry has decided not to extend excise duty cuts on automobiles and consumer durables beyond Wednesday, December 31.

This will make these products costlier from next year. The duty cuts have hit the government’s collection by about Rs 2,500 crore.

The interim Budget of former finance minister P Chidambaram had reduced the excise duty on small cars, scooters, motorcycles and commercial vehicles to eight per cent from 12 per cent. For sports utility vehicles, it was cut to 24 per cent from 30 per cent, for mid-sized cars, to 20 per cent from 24 per cent and for large cars, from 27 per cent to 24 per cent.

For consumer durables, the excise was reduced to 10 per cent from 12 per cent. The sops were given till June 30. In that month, Finance Minister Arun Jaitley had extended the concessions by six months, to December 31.

Maruti Suzuki India Chairman R C Bhargava said, “The government has to take these decisions, considering all aspects of the economy. It could have a short-term impact on automobile sales but the government has to take into account the health of the entire economy.”

The revenue department feels the cuts have not benefited these segments by much, let alone the larger manufacturing sector.

In October, car sales had declined for a second month in a row, on an annual basis, by 2.6 per cent to 159,000 units, despite the festival season, according to the Society of Indian Automobile Manufacturers (Siam). Motorcycle sales were down 8.7 per cent to 10,08,761 units.

In November, however, there was a rise in car sales. These increased 9.5 per cent to 156,000 units on a yearly basis. However, the decline in motorcycle sales continued, falling three per cent to 853,000 units from 880,078 a year earlier, said Siam.

The revenue department said car sales in November had risen on anticipation excise duty cuts would expire by December-end.

Various trade bodies and business chambers had approached the finance ministry to extend the duty cuts on automobiles. The Confederation of Indian Industry sought an extension till March 31, 2015. That would have cost the exchequer another Rs 750 crore, sources said. For the first seven months of this financial year, the Centre’s fiscal deficit has already totalled about 90 per cent of the Budget estimate for the full year.