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Old 2nd March 2015, 09:21   #1
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Default Budget 2015 & Indian Cars: All you need to know

Car manufacturers had mixed feelings after the Modi government's first Budget rolled out on the weekend. Never mind their feelings, this is a safe & realistic budget that aims to support long-term growth for India.



First, the bad news:

• Despite months of lobbying by the SIAM & car manufacturers, the auto industry didn't even get a mention in the Budget. Yep, they've been given the cold shoulder.

• Cars remain a 'luxury item' and will continue to be taxed heavily. New cars are among a handful of big ticket items that are sold via white money only.

• Service tax has increased from 12.36% to 14%. This will make servicing your car a little more expensive.

• The basic excise duty on small cars (hatchbacks & sub-4 meter sedans) goes up marginally from 12.36% - 12.5%. Honestly, this won't have any negative impact at all. For other categories, it remains the same:
24% - Midsize cars over 4 meters in length, but with engines smaller than 1.5L (Petrol or Diesel)
27% - Big cars over 4 meters in length, and with an engine size larger than 1.5L (Petrol or Diesel)
30% - SUVs

• A minuscule token amount of Rs. 75 crore has been allocated to boost the Electric Vehicle sector.

• The tyre industry has been asking the government to abolish the silly 'inverted duty structure' since ages, and I agree with them. Sadly, nothing in the budget for tyres either. Things are rather ironic as they stand today. Tyres are easily imported into the country as the applicable customs duty they carry is a paltry 10% (or less, due to trade agreements with some countries). On the other hand, natural rubber (a crucial raw material) is levied an import duty of 20%! The Government needs to increase the duty on tyres ASAP!

• On the day of the budget, the prices of petrol & diesel went up by 3 bucks a liter.

The good news!

• This progressive budget will stimulate growth and boost consumption. A better economy & higher GDP always boost car & bike sales.

• A stronger rural market due to agricultural reforms & development. Auto manufacturers with presence in rural India (e.g. Maruti, Mahindra), all two-wheeler manufacturers & tractor makers will benefit from greater demand in the rural economy.

• The Government will reduce corporate taxes from 30% to 25% over the coming 4 years. Auto companies will profit from this.

• GST (Goods & Service Tax) will finally roll out in April 2016. It will be a game-changer. A simplified, reduced tax structure will help the new car market.

• An additional 70,000 crore rupees for the infrastructure sector! Commercial vehicle manufacturers have a lot to look forward to.

• 1 lakh kms of new roads will be developed across India, over and above the completion of roads currently undergoing work.

• Import taxes on CBU commercial vehicles has been hiked from 10% to 20%. Steeper custom duties support the cause of local manufacturing.

• Excise duty concessions on EV & hybrid vehicle parts (replacement batteries & other specified parts) have been extended for yet another year. The rate currently stands at 6%.

• Government initiatives on skill development will result in a better workforce for the auto industry.

• The Finance Minister has committed that doing business in India will be made easier. Lots of processes are being simplified. This is especially important for those car makers who are on an expansion spree.

• The excise duty on ambulance chassis has been slashed from 24% to 12.5%.

Last edited by GTO : 3rd March 2015 at 16:03. Reason: Corrections
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Old 2nd March 2015, 09:48   #2
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Default Re: Budget 2015 & Indian Cars: All you need to know

To cut it short, the good stuff (if any) is indirect and long term. The not-so-good stuff is direct & immediate.

Considering the auto lobby is fairly strong, comes as a surprise that the budget does not cater in any way to this industry.
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Old 2nd March 2015, 11:48   #3
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Default Re: Budget 2015 & Indian Cars: All you need to know

Thanks GTO for insights. Very detailed and timely.

I think, there aren't much direct sops announced for the auto industry, but a general pick up in economy and moreso in people's sentiment, supported by investment in larger road network would indirectly turn out positive for the industry in coming years. New road connectivity can broaden overall customer base and improve demand from remote / rural areas as well which are currently not well connected.
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Old 2nd March 2015, 12:17   #4
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Default Re: Budget 2015 & Indian Cars: All you need to know

It is a long term, growth oriented approach by PM Modi and Arun Jaitley.

The sad part is actually not related to the budget in direct proportions but the failure to set a wrong thing right...

I am talking about the Govt. imposing mandatory safety features in the car.
Ideally, a mention or a rule to this regard should have been mandated.

The Rs. 3 increase in the fuel prices was just waiting to happen and unfortunately has happened sooner than later(as expected)
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Old 2nd March 2015, 12:45   #5
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Default Re: Budget 2015 & Indian Cars: All you need to know

The way to look at a budget is to just look at it as the "balance sheet" of the government and also to look at the overall road map. There may still be a lot of things which would be "work in progress" and may be unveiled at an appropriate time. The Govt. doesn't have to launch/announce everything on the budget day!!!
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Old 2nd March 2015, 12:53   #6
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Quote:
Originally Posted by GTO View Post
..............

• Service tax has increased from 12.36% to 14%. This will make servicing your car a little more expensive.
..........
There is a silent provision for increasing it to 16% - 14% plus 2% for the Swatch Bharat Mission!

Quote:
Swachh Bharat Cess:
An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% of the value of such taxable services with the objective of financing and promoting Swachh Bharat initiatives. This Cess shall be levied from a date to be notified by the Central Government in this regard and will not have immediate effect.
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Old 2nd March 2015, 13:29   #7
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Default Re: Budget 2015 & Indian Cars: All you need to know

Thanks GTO for this useful information on budget 2015.

As said by Mr. Sedate on the previous post. I sincerely feel the pain of service tax every time and nowadays it pains even when I take my cars for washing. Further increasing the service tax will be a additional burden for all car owners. I hope the central government atleast stabilises the same in the future.
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Old 2nd March 2015, 13:37   #8
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Default Re: Budget 2015 & Indian Cars: All you need to know

I have to disagree with the OP regarding tyres, coming from a family that depends on rubber for income, the drop in prices has benefitted manufacturers tremendously. The tyre stocks reflect this reality, while planters who sell the rubber get paid about 20% lower than market rates, rubber purchasing industries have been given a VAT waiver. The tyre industry doesn't need any sops, if you can't operate at a profit after rubber prices drop by 60% and oil prices are at decades' lows and prices have been hiked by 15% maybe they should get out of the business.

I will never buy an Indian brand tyre for my car, I knew an employee at one the leading tyre companies(Indian one) who used only high price Michelins on his car, goes to show the faith he had in the product.
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Old 2nd March 2015, 16:53   #9
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Default Re: Budget 2015 & Indian Cars: All you need to know

One of the most important aspects of this budget is MUDRA [ Micro Units development Refinance Agency], a corpus of Rs 20000 Cr. to tap the untapped potential of the' super-employer' of our country, the unorganized MSEs which dot the rural and semi-urban landscape and ironically, these never got the attention from our PSBs.
IT is a tragedy that our banks are always willing to loan millions and billions to the super-rich class but are highly apprehensive of funding few thousands or a lakh to these indigenous businesses/ crafts which are, as per some stats, generates 12.8 Cr jobs.

If this is implemented with the same enthusiasm as the JDY, a transformation in the semi-urban and rural landscape would be imminent that would invariably boost the sale of automobiles tremendously.


Personally though, I am upset that I have nothing much to cheer about ;same tax structure, little tax exemptions.. [ except to pacify myself by saying that it's for the welfare of the country ]

Last edited by poised2drive : 2nd March 2015 at 17:05.
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Old 2nd March 2015, 17:08   #10
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Default Re: Budget 2015 & Indian Cars: All you need to know

Very timely and to the point summary and analysis of the budget 2015. Thankful for the timely update and the valuable information.


Quote:
Originally Posted by Sedate View Post
There is a silent provision for increasing it to 16% - 14% plus 2% for the Swatch Bharat Mission!
Sedate, actually there is a provision for 2% of cess in name of Swachh Bharat Mission (in future) but that will not be levied on the total value of the service. This is a cess applicable on the service tax. Hence the actual increase is not upto 16%, but to 14.28%. (2% of 14%). Hope the confusion is cleared.

Regards,
Saket
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Old 2nd March 2015, 17:41   #11
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Quote:
Originally Posted by saket77 View Post
Very timely and to the point summary and analysis of the budget 2015. Thankful for the timely update and the valuable information.




Sedate, actually there is a provision for 2% of cess in name of Swachh Bharat Mission (in future) but that will not be levied on the total value of the service. This is a cess applicable on the service tax. Hence the actual increase is not upto 16%, but to 14.28%. (2% of 14%). Hope the confusion is cleared.

Regards,
Saket
But it mentions as " at a rate of 2% of the value of such taxable services"

So I think it is not like the earlier educational cess we had earlier, but a tax itself.
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Old 2nd March 2015, 17:55   #12
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Default Re: Budget 2015 & Indian Cars: All you need to know

Quote:
Originally Posted by Sedate View Post
But it mentions as " at a rate of 2% of the value of such taxable services"

So I think it is not like the earlier educational cess we had earlier, but a tax itself.
Should not be. Here is what I got:

Quote:
Government on Saturday proposed a 2 percent Swachh Bharat cess on Service Tax and allowed 100 percent deduction on investment in Swachh Bharat Kosh.

EDIT: Missed to quote the link: http://www.moneycontrol.com/news/eco...h_1316766.html

Regards.

Last edited by saket77 : 2nd March 2015 at 17:58.
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Old 2nd March 2015, 18:04   #13
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Quote:
Originally Posted by saket77 View Post
Should not be. Here is what I got:




EDIT: Missed to quote the link: http://www.moneycontrol.com/news/eco...h_1316766.html

Regards.
Ah! TV18/Network 18!

http://indiabudget.nic.in/ub2015-16/memo/mem1.pdf

Says (under Service tax)
Quote:
2. Swachh Bharat Cess:
• An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or any
of the taxable services at a rate of 2% of the value of such taxable services with the objective of financing and promoting Swachh
Bharat initiatives.
This Cess shall be levied from a date to be notified by the Central Government in this regard and will not have immediate
effect.
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Old 2nd March 2015, 20:26   #14
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Post Re: Budget 2015 & Indian Cars: All you need to know

Quote:
Originally Posted by GTO View Post
• Import taxes on CBU commercial vehicles has been hiked from 10% to 20%. Steeper custom duties support the cause of local manufacturing.
Does this mean hike in prices of D-Max pickup? Can somebody clarify.

Does this also mean higher prices of future CBUs like Toyota's Hiace?

If it is true I am not sure how this is a positive step. There is not enough demand for everything to be manufactured or assembled.

Regards.
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Old 2nd March 2015, 22:39   #15
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Default Re: Budget 2015 & Indian Cars: All you need to know

Quote:
Does this mean hike in prices of D-Max pickup? Can somebody clarify
Isuzu has an assembly unit in chennai ( HM / Mitsubishi owned )

http://www.team-bhp.com/forum/indian...ed-rs-22l.html (Official: Isuzu to build MU-7 and D-Max at HM's Chennai Plant Edit: Launched @ Rs.22L)
Quote:
Does this also mean higher prices of future CBUs like Toyota's Hiace?
If Toyota had plans to Import instead of assembling then Yes :(
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