New Delhi: Cars and consumer durables are set to become costlier in the New Year as finance ministry is unlikely to extend excise duty relief on them beyond December 31. The previous UPA government in its interim budget in February had cut excise duty on auto and consumer durables till June 30. However, the new Modi government had extended the relief by six months till December 31 to give boost to the industry.
The government is now unlikely to extend the relief as it needs to mop up funds to meet the tight fiscal deficit target of 4.1 per cent in the current fiscal due to lower than expected tax receipts, said sources.The increase in excise duty will help the government to raise Rs1,000 crore in the last quarter of 2014-15. The impact in the prices will be more on cars than on consumer durables. This is because consumer dura-bles are cheaper than cars and also because duty relief on automobiles was more.
During the interim budget, excise duty on small cars, motorcycles, scooters, three-wheelers and commercial vehicles was cut from 12 to eight per cent and on mid-segment cars from 24 per cent to 20 per cent.On SUVs, the duty was cut from 30 per cent to 24 per cent. On capital goods and consumer du-rable sector, the excise duty was reduced from 12 per cent to 10 per cent. However, the sugestions about the withdrawl of duty relief has raised fears in the automobile industry which has seen volatile sales during the year.
“It is a government decision. We don’t have any option but to accept it. It will have an impact on sales. I believe sales will slow down in the short term due to this development,” said Mar-uti Suzuki India (MSI) chairman R. C. Bhargava.He said that to the extent the excise duty goes up, car prices will go up.“It will temporarily affect sales ... but I don’t think it will have any long-term impact,” he added. General Motors, Niss-an, Hyundai, BMW and Mahindra & Mahindra had already indicated that they will hike prices in January due to the rising in input costs.
