The market has been rife with speculations about the future of the excise duty cuts since they were set to expire on June 30, 2014. In a bid to relieve the market from the rather precarious conditions, India's finance minister, Arun Jaitley, announced the extension of the benefits today. For now, the excise duty benefits will be available till December, 2014. During the interim budget presented in February, the excise duty on small cars, two-wheelers and commercial vehicles was reduced to 8% from 12%, whereas that on SUV's was reduced to 24% from the existing 30%. The mid-size and large cars segment also saw a reduction from the pre-existing 27% to 24%. These benefits were to be applicable till June 30, 2014.
Arun Jaitley, after making the announcement, said, "Any loss from revenue can be made up in economy in long term. I hope economy benefits from extension of excise duty cuts." He further explained, "Considering the present situation in various sectors, the government today has decided to extend the facility of this reduced excise duty to all those sections for a further period of six months, i.e., they will continue till December 31, 2014."
The automobile industry has been reeling from a slowdown in sales for quite some time now. According to SIAM reports, sales in the 2013-14 fiscal year stood at 17,86,899 units, a drop of 4.65% as compared to the 18,74,055 units sold in the previous fiscal.
Mr. Vikram Kirloskar, President, SIAM has warmly welcomed the new Government's decision to extend the reduced Excise Duty benefits for the Auto Industry for six months.
"We are certain that the extension of the reduced Excise Duty will contribute positively to improve the buyer sentiment and would help in bringing about a sustained recovery in the automotive industry that has been languishing for over two years now. This will go a long way in bringing back growth, investments in the industry as well as encourage higher employment."
"On behalf of the entire automotive sector, I would like to thank Government for their very timely and supportive role", Mr. Kirloskar added.
Mr Venu Srinivasan, Chairman, TVS Motors, in a conversation with NDTV, also expressed relief over the move. He believes that the industry would have suffered consequences hadn't the government extended the deadline.
Welcoming the new government's announcement Mr. Sumit Sawhney - Country CEO and Managing Director for Renault in India said, "The new government has shown a positive intent towards the growth of key sectors to revive the Indian economy. The Extension of Excise duty reduction for automobiles announced in February by another six months is a welcome move and a step in right direction by the government, fortifying its intent to support the progress in the auto sector.
We would like the government to take a long term view to have a unified excise duty structure and look forward to further reduction in the duty.
Going forward the government will have to take concrete decisions to support the promotion of electric and hybrid vehicles for better cleaner India and also look at policies to check Emission and Fuel Efficiency norms, Fleet Modernisation and Scrappage policy for better environment conditions. This will provide the required impetus for the automotive sector which is a key driver for the overall economy / industrial growth."
Thanking the government on the announcement, President ACMA, Harish Lakshman, said, "ACMA welcomes the continuation of the reduced excise duty on automobiles until December 31, 2014. Considering the fact that the industry is yet to tide over the current challenging times, we hope that with this announcement will encourage automotive sales and thus benefit the component sector as well."
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