Luxury cars to be costlier despite CKD custom duty cut

Luxury car prices will rise but not as high as expected thanks to the halving of customs duty to 30% on completely knocked down (CKD) kits for pre-assembled engines, gearbox and transmission, according to experts.

"It (the decision to lower duty) will definitely provide a relief to the automobile industry. Although the prices of luxury cars will rise, it will not be as steep as it would have been earlier," KPMG Executive Director Pratik Jain told PTI.

He was responding to Finance Minister Pranab Mukherjee's decision to reduce the basic customs duty from 60% to 30% on CKD kits containing a pre-assembled engine, gear box, transmission assembly imported for the manufacture of vehicles.

While presenting the Budget 2011-12, Mukherjee had excluded units containing a pre-assembled engine or gearbox or transmission mechanism or chassis from the purview of CKD.

Although the other CKD parts continue to attract customs duty of 10%, for the specified parts of pre-assembled engine or gearbox or transmission, it became 60%.

MS Mani, Indirect Tax expert at Deloitte India said the partial withdrawal of the sharp increase in customs duty will "largely benefit luxury car manufacturers and customers wanting to buy these cars".