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Tuesday, Jul 20, 2004

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Auto dealers seek duty cut on cars

Our Bureau

Hyderabad , July 19

THE Federation of Automobile Dealers' Association (FADA) has expressed concern about the fineprint in the Budget and called upon the Finance Ministry to have a relook at some of the provisions and slash the excise duty on passenger cars to 16 per cent by bringing it on par with other vehicles to push up sales.

The FADA, which represents 1,800 dealers and 80 per cent of automobile trade, expressed concern about possible cascading effect of the service sector tax on the industry.

Its President, Mr Deshnidhi Kasliwal, the Chairman of southern region, Mr Vinay R. Saboo, and the Chairman, Major P.T. Chowdary, said that the Budget does not contain any specific measures aimed to promote the automotive industry. The best way to address impediments in its growth was to cut the excise duty from 24 per cent to 16 per cent on cars and bring it on par with other vehicles.

FADA is disappointed to find that excise duty on passenger cars and multi-utility vehicles has been retained at 24 per cent.

The recent trends show that the offtake has flattened as the industry was anticipating some more duty cuts and concessions to the sector. "We believe that instead of additional taxes, the Government could have brought down these imposts, which would have generated more volumes. This would have helped the entire auto ancillary industry and manufacturing sector directly," they contended.

On the flip side, they said, "The service tax, which has been a major cause for concern for automobile dealers, has been raised from 8 to 10 per cent and 13 new services have been added to the service tax net. In addition, the two per cent education cess has been levied on all Central taxes, including income tax, excise duty, customs duty and service tax. Combination of these levies is set to increase the costs, eroding the competitiveness of the Indian industry and reducing the ability of people to spend on consumer durables."

The representatives of FADA said they would call upon the Finance Minister and express their views so that necessary corrective measures taken up. The automotive industry has turned a buyers market where they can choose the dealer of choice. While the margins have remained stable at about 2.5 per cent as against nearly 10 per cent in some of the developed economies, the infrastructure costs have gone up bringing in lot of pressure. This called for a fresh look as many of the dealerships could become unviable if the current margins continue while more taxes are imposed.

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