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Excise relief for auto sector may continue till February
September, 05th 2014

The Heavy Industries Ministry, the nodal wing in policy-making for the automobile sector, is likely to push for an extension in excise duty relief for the sector till next February.

Excise duty is levied at the factory gate and is included in the maximum retail price of a product. “We will write to the Finance Ministry for extension of duty benefits for some more time as the industry is yet to stabilise fully. We would also like to have a long-term policy for the sector in the next Budget,” a senior official from the ministry told BusinessLine.

The excise duty relief, announced in the Interim Budget by the UPA Government and extended by the present NDA Government, is scheduled to end on December 31, 2014.

To boost manufacturing, UPA Finance Minister P Chidambaram had lowered excise duty on small cars, motorcycles, scooters and commercial vehicles to 8 per cent from 12 per cent, on sports utility vehicles to 24 per cent from 30 per cent, on mid-segment cars to 20 per cent from 24 per cent and on large-segment cars to 24 per cent from 27 per cent. This relief was to end on June 30.

The August sales numbers of auto companies showed a mixed trend. While Maruti, Hyundai, Honda and Nissan saw sales surge in comparison with the same month last year, Mahindra, Tata Motors, Toyota Kirloskar, Ford India and GM India witnessed a decline.

In the commercial vehicles segment, Eicher Motors and Ashok Leyland saw a rise, while Tata Motors and Mahindra registered lower sales. All the major two-wheeler companies, such as Hero MotoCorp, Honda Motorcycles, Royal Enfield and TVS Motor, showed handsome gains. Now, every company is banking on the festival season that kicks off later this month.

The Heavy Industries Ministry feels that continuation of the lower excise duty for the auto sector will accelerate growth as well as employment. The auto sector is one of the biggest job creators, both directly and indirectly. It is estimated that every job created in an auto company leads to three-five indirect ancillary jobs.

The estimated monthly loss to the exchequer from the duty cut is ?250 crore. Finance Minister Arun Jaitley had said that there would be revenue implications, but as the economy benefited from such a move, any tax loss could be recovered.

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