Government ends excise duty cut on cars; prices set to rise

The prices of vehicles are set to rise as the Government of India has decided not to extend the concession on the excise duty on vehicles.

In February, in the interim budget for 2014, the Government of India had slashed the rates of excise duty on vehicles. The duty on small cars was slashed from 12% to 8%, medium-sized cars from 24% to 20%, large cars from 27% to 24%, SUVs from 30% to 24% and motorcycles and scooters from 12% to 8%. This step was taken to revive the automobile market in the country which was going through the worst slump in its history.

This reduction in the rate of excise duty would be applicable till June 30, 2014. In June however, the government decided to extend the excise duty concession on vehicles by six months till December 31, 2014. In September, there was a statement from the Minister for Heavy Industries that the concession would be extended at least till March 2015. However, there was no official confirmation of the same and now, the government has decided against extending it.

Many manufacturers have already announced a hike in prices of their cars from January. With the excise duty concession being rolled back, the prices of vehicles are bound to go up even further. This has got manufacturers worried as it could have a negative effect on sales and growth.

The auto industry had witnessed a growth of 10.01% in April-November period this fiscal after two successive years of sales slump.

Source: Economic Times