Budget 2015-16: Auto makers seek excise duty cuts in Union Budget

Auto makers across different brands are hoping the government will once again provide excise duty benefits to the automotive sector in the upcoming Budget.

Prices of automobiles had gone up after the government decided not to extend the reduced excise duty rates provided to this sector beyond December 31 last year. Now the excise duties are back to the rates that existed before February 2014.

“The government in the upcoming budget should look at cutting down excise duty. This is necessary to not only boost the overall sentiments of the business environment but will also effectively aid the ‘Make in India’ campaign,” said Vimal Sumbly, MD, Triumph Motorcycles India.

“The industry expects government to reintroduce concessional excise duty on vehicles and auto components and rationalise taxes in order to boost demand and help the industry to develop further,” said Tomas Ernberg, MD, Volvo Auto India.

"Rationalization of duties and taxes are necessary to boost sales and keep up the growth momentum. We hope the Budget announces the come-back of the excise duty concession," said N. Raja, Senior Vice-President & Director Marketing and Sales Division, Toyota Kirloskar Motor (TKM).

“The industry is hopeful that the excise duty reduction is reintroduced, as from a long-term perspective, a unified excise duty structure will go a long way to benefit the industry,” said Sumit Sawhney, Country CEO & MD, Renault India Operations.

In the interim budget announced in February 2014, the previous UPA government had cut excise duty on cars, SUVs and two wheelers to boost the sector that was struggling in the face of the economic downturn.

Excise duties on small cars, two wheelers and commercial vehicles had been reduced to 8 per cent from the previous 12 per cent. For SUVs, it was reduced to 24 per cent from 30 per cent, for mid-sized cars to 20 per cent from 24 per cent and to 24 per cent for large cars from 27 per cent.

In June, the new Narendra Modi government extended the excise duty concessions till December 31, 2014. Now they are back to rates that existed before February 2014.

However, not all are bullish on the government rolling back excise duty concessions in the upcoming Budget.

“As far as the auto sector is concerned, I do not see anything major coming. The industry, of course, always hopes for excise duty reductions. But I do not think that there will be any across-the-board reduction in excise duty in this budget. We might see some rationalisation in certain segments of the industry where there are some anomalies. Some very high duties might get corrected, but I do not see overall reduction,” said Pawan Goenka, ED, Mahindra & Mahindra.

Already, the withdrawal of excise duty concessions had an impact on sales across manufacturers, with main players Maruti Suzuki and Hyundai posting single digit growth in January. Others like GM India, Ford and Mahindra and Mahindra saw decline in sales. The only exceptions posting healthy double digit growth rates during the month have been Tata Motors, Toyota and Honda Cars India.