The Budget seems to have finally put to rest uncertainty over how excise duty should be levied on passenger cars which are sold at discounted prices.

The Budget has now made specific provisions which allow transaction value to be accepted even if the manufactured goods (including automobiles) are sold at a price below the cost of production and profit, according to Vinesh Kriplani, a partner with global consultancy EY (formerly Ernst & Young).

In 2012, the Supreme Court had ruled in a case related to Fiat India that the excise department could reject the transaction value declared by the carmaker. This was because Fiat India was selling cars at prices lower than the cost of manufacture for about five years to increase its market share. Such as sale of vehicles was considered extra commercial consideration by the apex court even though there was no direct/indirect flow of cash consideration from the customers to the carmaker.

In view of this, the Court had held that the sale value declared by the carmaker could not be considered the assessable value and excise duty would need to be paid on the cost of manufacturing plus profit.

Later, the Central Board of Excise and Customs, in a clarification, said the excise authorities could not reject all such cases and each of the cases needs to be examined in detail before rejecting the transaction value declared by the manufacturers.

Incentives

Kriplani added though the excise duty concession for carmakers had already been extended till December, several incentives and higher budgetary allocation for the various sectors are bound to help the auto sector as well. Higher allocation for the road sector is one such example of how it will impact several sectors.

Though abolition of the National Calamity Duty of 1 per cent on automobiles was part of the industry’s wish list, it hasn’t been done this time, he said.

Vikram Kirloskar, President of the Society of Indian Automobile Manufacturers, said the sector was hoping for an extension of the excise duty concession beyond December 31.

“The industry was hoping to see some demand stimulation measures for the commercial vehicle sector, which has been in the negative territory for over 27 months and is disappointed that it has not happened.” Shekar Viswanathan, Vice-Chairman, Toyota Kirloskar, said the extension of the excise duty cut was a positive move. “One must understand that this Government has been in power for just 45 days. We believe the auto sector has better things in store as the Budget has given incentives to the shipping sector, building water ways, road development, etc, which will indirectly help our sector.”

The Budget could have implemented the scrappage policy, which the automobile manufacturers have been talking about. “However, the work still needs to be done on this and needs to be fine tuned before it can be implemented. It may be announced next year,” said Viswanathan.

RN Rao, Director, sales and marketing for AMW Motors, a truck maker, said excise concessions for the automobile industry are being continued and recent trends in the commercial vehicle sector gives cause for cautious optimism.

“The recover of the industry is closely linked to so many infrastructure and consumer sectors that it will be some time before an uptick in demand is continuous and healthy.”

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