Budget 2015-16: Car sales could rev up as industry spared tax hike

  • Mar 2, 2015
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If the budget offered a 0.14% excise hike for smaller cars, it has made bigger vehicles - which attract 27% duty - just a bit cheaper.

Auto Budget 2015 effect

The Budget spared the car industry a tax hike just as finance minister Arun Jaitley came out with a token fund of Rs 75 crore to push green vehicles like electric cars.

However, the budget did see the doubling of duty on imported commercial vehicles which will lead to an increase in prices of some of the high-end luxury buses and a section of heavy-technology trucks.

"My Government is also launching a scheme for faster adoption and manufacturing of electric vehicles. I am proposing an initial outlay of Rs 75 crore for this scheme in 2015-16," Jaitley said.

The FM also moved ahead to rationalise duties by subsuming the education cess, which saw the basic excise rate on smaller vehicles like compact cars and entry sedans go up from 12.36% to 12.5%.

The burden due to this would be marginal, ranging from a few hundred rupees and going up to the range of Rs 1,000.

Most of the companies, however, indicated that they may absorb this and will not pass it on to the market immediately.

If the budget offered a 0.14% excise hike for smaller cars, it has made bigger vehicles which attract 27% duty just a bit cheaper. Mahindra & Mahindra's auto division president Pawan Goenka said, "There is an effective excise reduction on larger vehicles by 0.84-0.9% which will lead to a small price benefit which we will pass on to the customer."

The benefit, he said, is around Rs 1,000 on a vehicle like the XUV500 which retails at around Rs 12 lakh.

The car industry had seen duty go up across the product spectrum at the beginning of the year when the Government did not continue with a softer duty regime announced last year. The move had already seen the prices of vehicles go up across the vehicle category, ranging from small cars to SUVs to larger sedans.

Jaitley was mindful to provide support to green technologies. The concessions from customs and excise duties available on specified parts for manufacture of electrically-operated vehicles and hybrid vehicles were extended by him for more year or till the end of March next year.

The industry said that companies engaged in the manufacture of clean vehicles will benefit from the move. "It's like a life-saver for the ailing companies who had invested into the environmentally-friendly vehicles but were bleeding heavily because of the lack of government support," Sohinder Gill, a Director at Society of Manufacturers of Electric Vehicles (SMEV), said.

The government has an ambitious target of putting 5 million electric and hybrid vehicles per year on the road by 2020 under the National Electric Mobility Mission Plan (NEMMP).

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