Auto industry fears slowdown

The Union Budget proposal to increase excise duty on SUVs and luxury vehicles has left the auto sector fuming. Experts said the decision would only mean price rise in the two sectors and further unrest, in the absence of any concrete relief to the industry.

The excise duty on SUVs (falling under CTH 8703 and having engine capacity greater than 1500cc), including utility vehicles, is being increased from 27 per cent to 30 per cent with immediate effect. A scheme of refund in respect of SUV taxis has been prescribed, with a view to ensuring that the duty increase does not affect SUVs used as taxis. A detailed analysis of the budget by law firm Economic Laws Practice points out that in respect of SUV taxis, a refund of 28 per cent of the excise duty paid at the time of clearance would be available. Also, the duty on chassis of diesel motor vehicles for transport of goods is being reduced from 14 per cent to 13 per cent. The validity period of concessional excise duty of 6 per cent granted to specified parts of hybrid and electric vehicles is being extended by two more years up to March 31, 2015.

On the other hand, all luxury vehicles will now attract 100 per cent import duty as against the present rate of 75 per cent. Basic customs duty on motorcycles with 800cc engines has been increased from 60 to 75 per cent. This rise in tax rates would mean SUV prices going up by Rs 15 lakh. A similar rise is expected in the motorcycle segments too, which would be passed on to the dealers.

Suhas Kadlaskar, Director, Corporate Affairs and Human Resource Development, Mercedes-Benz, said: "The budget is extremely disappointing... We were expecting some relief for the industry that is going through a bad phase. The SUV excise duty will be counter productive."

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