The Hindu Business Line : Car makers hold divergent views over excise duty sops

The issue of excise duty sops for passenger cars is turning out to be interesting with two camps of car manufacturers taking up opposing positions on the issue. While one camp lead by a leading car maker wants no change in the existing excise duty structure, the other says that there should not be any duty differential and that all passenger cars should be charged the Cenvat rate of 16 per cent uniformly. This, incidentally, is also the stated policy of the Society of Indian Automobile Manufacturers (SIAM).

The Director-General of SIAM, Mr Dilip Chenoy, was however cautious about sharing details on Thursday's meeting of the industry association. "We are in the process of collating various data. A clearer picture should emerge by late next week," he told Business Line. But according to representatives of some of the car makers, one of the main topics discussed was on the issue of duty concessions.

Duty concessions

While the industry is split on this issue, the Ministry of Heavy Industries is firm that the duty structure should be uniform. At the development council meeting of the Ministry of Heavy Industries and Public Enterprises held on October 20, the Joint Secretary, Ministry of Heavy Industries is learnt to have made three observations:

The definition of small cars as stated in the Auto Policy of 2002 should be adhered to.

Excise duty structure should be rationalised.

There should be across-the-board reduction of excise duty.

The Auto Policy clearly states that the growth of small cars with length not exceeding 3.8 metres should be encouraged. But during the Union Budget of 2006, while the excise duty for smaller cars was reduced to 16 per cent from 24 per cent, the sop came with a rider on engine capacity. Only cars of engine capacity up to 1200 cc for petrol and 1500 cc for diesel would be eligible for the concession.

Uniform excise duty

Car makers also point out that if the Government goes in for a uniform excise duty of 16 per cent for all passenger cars including multi-utility vehicles during the next budget, it might incur a loss of around Rs 650 crore during the first year but during the second year, the duty gain would be Rs 550 crore and in the third, it would be around Rs 660 crore.

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