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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%.

 
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