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Old 24th February 2011, 07:03   #1
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Default Car, bike prices to go up post Budget?

Found this article on NDTV.com

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Car, bike prices to go up post Budget?

The automobile industry achieved a record growth of over 30 per cent in 2010. But with the macroeconomic environment getting tougher, there are concerns if this growth can be sustained going forward.

Ahead of the union budget, auto stocks have already taken a hit, fearing a hike in excise duty on cars and two-wheelers. The government is expected to announce a complete withdrawal of the stimulus package under which excise duty for automobiles were cut. This means the excise duty on small cars and two-wheelers is likely to go back to 12 per cent. Auto makers say prices of cars and bikes will go up if excise duty is hiked.

Dr Pawan Goenka, President of Society of Indian Automobile Manufacturer's Association says, "Any increase in excise duty will definitely be passed on and it may affect the demand going ahead."

"Yes, there is a fear of roll back of excise duty but our recommendation to the government would be to not roll back any benefits especially if we are moving towards the GST. Under the GST regime, the peak duty is likely to be in the range of 8-10 per cent so why should the government raise duty to 12 per cent for just one year," Goenka added.

In the April-January period, car sales have jumped 23.4 per cent year on year while bike sales are up 25.4 per cent. Sale of commercial vehicles is also on the rise. Most manufacturers are facing a supply shortage, either because of their own insufficient capacity or that of their suppliers.

Raw material prices have also hardened this year by as much as 8-10 per cent. Interest rates have advanced 2-3 per cent and even fuel prices have risen over 10 per cent in the same period.

The margins of auto companies are already under pressure and any tax hike will be passed on (to consumers) by most players leading to a likely slowdown.

Not only auto companies but component makers who have started installing fresh capacities are now worried that it could all come to a naught.

Srivats Ram, President of Automotive Component Manufacturer's Association says, "Today we face challenges of capital, technology and inflationary pressures and our demands are to address these needs. These are the need of the hour. If not, the growth will come down from 25 per cent to 15-20 per cent."

The auto component manufacturers have asked the finance minister to set up a Rs. 7,500 crore technology upgradation and development fund for the next five year period which gives them access to soft loans. Like their clients, component manufacturers also want import duty on steel and aluminium alloys to be done away with.

Corporate India's expectations from the Budget include lower corporate tax rates, lowering of the minimum alternate tax or MAT to 15 per cent and a speedy introduction of the GST.

SIAM says, the auto industry contributes over 20 per cent to the excise kitty of the government and any increase in duty will definitely result in higher automobile prices. This in turn will hit sales and reduce excise related revenue.

A slowdown at a time when global companies are focusing on India could also put off investments and fresh hiring.


Read more at: Budget News: Car, bike prices to go up post Budget? - NDTV Profit
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Old 24th February 2011, 11:23   #2
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Default Re: Car, bike prices to go up post Budget?

All the possibilities mentioned in the article are eventualities IMO.

As far as the Govt is concerned, automobile industry is still in the luxury bracket of the economy and with the growth the industry has shown in the recent past. Not to mention the compounding problems of excessive traffic on a road network which is struggling to cope and the oil pool deficit which is growing at an alarming rate!
The loss in revenue in excise to the govt is actually debatable! IMO this is going to be a tough budget for the auto industry
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Old 24th February 2011, 12:22   #3
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Default Re: Car, bike prices to go up post Budget?

Going by this : Consumer durables may become costlier - The Times of India, the costs of vehicles will go even higher due to "rise in input costs"!
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Old 25th February 2011, 11:02   #4
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Default Re: Car, bike prices to go up post Budget?

After the Karnataka Budget was presented yesterday Feb 24, car prices after registration will be even more due to "10% cess charged on road/registration tax of a vehicle has been raised to 11%".
For example, the road tax rate is 13% for cars priced up to Rs 5 lakh, 14% on cars priced between Rs 5 lakh and Rs 10 lakh, and so on. Buyers currently pay an additional cess of 10% on road tax. So effectively, in the above two cases, the total tax payable would be 14.3% (13% + 1.3%) and 15.4% (14% + 1.4%).
To understand the impact of the cess increase, consider this example of the Honda City that has an ex-showroom price of Rs 9.34 lakh. Cars up to Rs 10 lakh are currently levied road tax of 14% and cess of 1.4% on the price of the vehicle, which effectively means a total levy of Rs 1.43 lakh.
With the new cess rate, the buyer will have to pay road tax of 14% and cess of 1.54%, which means the buyer will incur total tax levy of 1.44 lakh. In other words, the buyer will have to incur roughly an additional Rs 1,000 on this purchase.

Source - Times of India Feb 25.
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Old 25th February 2011, 11:26   #5
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Quote:
Originally Posted by sushrutha View Post
After the Karnataka Budget was presented yesterday Feb 24, car prices after registration will be even more due .... With the new cess rate, the buyer will have to pay road tax of 14% and cess of 1.54%, which means the buyer will incur total tax levy of 1.44 lakh.

Source - Times of India Feb 25.
1.4L road tax? Will the KA Govt name a street on the car owner's name for coughing up such an amount?
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Old 25th February 2011, 11:34   #6
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Default Re: Car, bike prices to go up post Budget?

This is called double whammy, specially for people in Karnataka.
The state budget has hiked the cess and it seems the central budget will also add to the burden.

On top of it, expect petrol prices also to go up, thanks to Mr Gaddafi.
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Old 25th February 2011, 11:45   #7
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Default Re: Car, bike prices to go up post Budget?

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Originally Posted by kiku007 View Post
1.4L road tax? Will the KA Govt name a street on the car owner's name for coughing up such an amount?
I hope they start doing that on a rotational basis at least!!

more taxes in a economy like this! I am sure all this will reflect on the april and may sales!
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Old 25th February 2011, 12:10   #8
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Default Re: Car, bike prices to go up post Budget?

Quote:
Originally Posted by sushrutha View Post
After the Karnataka Budget was presented yesterday Feb 24, car prices after registration will be even more due to "10% cess charged on road/registration tax of a vehicle has been raised to 11%".
For example, the road tax rate is 13% for cars priced up to Rs 5 lakh, 14% on cars priced between Rs 5 lakh and Rs 10 lakh, and so on. Buyers currently pay an additional cess of 10% on road tax. So effectively, in the above two cases, the total tax payable would be 14.3% (13% + 1.3%) and 15.4% (14% + 1.4%).
To understand the impact of the cess increase, consider this example of the Honda City that has an ex-showroom price of Rs 9.34 lakh. Cars up to Rs 10 lakh are currently levied road tax of 14% and cess of 1.4% on the price of the vehicle, which effectively means a total levy of Rs 1.43 lakh.
With the new cess rate, the buyer will have to pay road tax of 14% and cess of 1.54%, which means the buyer will incur total tax levy of 1.44 lakh. In other words, the buyer will have to incur roughly an additional Rs 1,000 on this purchase.

Source - Times of India Feb 25.
1.4% of 9.34 lakhs = 13000 approx.
Not a small amount at all!

Let us see what AP govt. does! AP and KA are the worst in terms of state taxes. Wonder what is the reason? Are they proving superior infrastructure? Not at all! Some of the best infrastructure are at the places where the taxes are low ( Chandigarh, for example).

Right now, it is 12% in AP.

On the flip side, if the trend continues, it is a definite positive for the resale value of the car
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Old 25th February 2011, 12:12   #9
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Default Re: Car, bike prices to go up post Budget?

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Originally Posted by kiku007 View Post
1.4L road tax? Will the KA Govt name a street on the car owner's name for coughing up such an amount?
Well I don't want to start a debate.. Frankly speaking we Karnataka people are fedup with those extra taxes and corrupt government.
It's just we are emptying our pockets only to fill the Ministers & corrupt officials Belly & bank balance.
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Old 25th February 2011, 13:17   #10
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Default Re: Car, bike prices to go up post Budget?

And what absurd logic behind increasing taxes on motor vehicles, read below:

Noting that sales of motor vehicles, two-wheelers and transport vehicles had increased in the later half of this fiscal, the budget proposed to modify and increase the motor vehicle tax on various types of vehicles to mobilise an additional Rs.249 crore in FY 2011.
  • It is only the salaried class who are taxed the most
  • KA already had the highest total Motor Vehicle Taxes in India
  • Does he know how much fuel prices have gone up? and how much more it will go up?
  • When will we have qualified people running our country?
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Old 25th February 2011, 13:38   #11
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Default Re: Car, bike prices to go up post Budget?

Quote:
Originally Posted by kiku007 View Post
1.4L road tax? Will the KA Govt name a street on the car owner's name for coughing up such an amount?
Quote:
Originally Posted by Mafia View Post
I hope they start doing that on a rotational basis at least!!

more taxes in a economy like this! I am sure all this will reflect on the april and may sales!
Guess 2 roads in my name....will be paying 2.8 Lacs (18.7%) as road tax for my laura tomorrow.

The irony is they collect record road tax in Karnataka and yet we have to pay toll for every other bridge (Electronic city expressway, proposed tolling of BIAL road & almost all highways). Envy folks in other states - who pay much less for road tax, fuel & yet have better roads than Karnataka. God save us.
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Old 25th February 2011, 13:45   #12
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Default Re: Car, bike prices to go up post Budget?

The present government is a sham. It is also a shame on every Indian citizen who is allowing it to stay put and govern all of us with its highly parochial and absurd rules. If there is an increased number of cars and bikes on the road, isn't it helping the economy to soar? Are we using our vehicles only for fun and liesure? What about the multi-billion dollar FDI that's coming in to the country (and going directly to their bank accounts in Cayman Islands, Mauritius and Switzerland) due to increased consumption in every area - Food, Lifestyle, Travel, etc? If they would have not spent Trillions on 'upgrading and renovating' stadiums for the Commomwealth Games, the same money could have been utilized to meet the fiscal deficit for generations to come. And yes, a few hundred stadias could have been built, grounds up, in the same amount.

Taxing the helpless salaried class staffer to death, has long been the 'modus operandi' of India's Democratic governments. In this country, it is better to be a business man 'with links' to the ruling party or to be a refugee with a fake ration card and the ability to 'cast' a vote (sell is the more appropriate verb) to any person/party who promises better amenities like electricity, gas, road encroachment rights, alcohol and similar perks for a healthy living in the gutter. Of course for free, under the various programmes for poor upliftment.
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Old 25th February 2011, 15:09   #13
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Default Re: Car, bike prices to go up post Budget?

The worst thing here in Karnataka is that we are forced to pay a Life time tax. Am not sure if it is the same in other states, but I've heard that it isn't so. Why would I have to pay for life if I want to keep a car for just a few years! And moreover, migrating to another state or coming in to Karnataka from other state is just a killer on the pocket.
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Old 25th February 2011, 15:22   #14
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Default Re: Car, bike prices to go up post Budget?

Quote:
Guess 2 roads in my name....will be paying 2.8 Lacs (18.7%) as road tax for my laura tomorrow.
2.8Lacs... That's ex-showroom price of an Alto Lxi-800...
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Old 28th February 2011, 12:34   #15
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Default Re: Car, bike prices to go up post Budget?

Quote:
Originally Posted by sushrutha View Post
"10% cess charged on road/registration tax of a vehicle has been raised to 11%".
For example, the road tax rate is 13% for cars priced up to Rs 5 lakh, 14% on cars priced between Rs 5 lakh and Rs 10 lakh, and so on. Buyers currently pay an additional cess of 10% on road tax. So effectively, in the above two cases, the total tax payable would be 14.3% (13% + 1.3%) and 15.4% (14% + 1.4%).
the buyer will have to incur roughly an additional Rs 1,000 on this purchase.

Source - Times of India Feb 25.
Quote:
Originally Posted by adimicra View Post
1.4% of 9.34 lakhs = 13000 approx.
Not a small amount at all!
It's not 1.4% increase on the road tax. It's an increment on the cess of the road tax.
Previously it was 13% + (10% of 13%'s CESS.. ) now it's 13% + (11% of 13%'s) so that's effectively ~14.4%, so an additional of 1000Rs.
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