Decision on excise duty cut continuation even earlier

The Budget will bring a carload of sops for the automobile industry, going by the current thinking in the Government. The key issue of excise duty, which requires immediate attention, is likely to be addressed even before the Budget. The Modi Government will present its first Budget on July 10.

Commerce and Industry Minister Nirmala Seetharaman, who also holds the junior Minister’s position in the Finance Ministry, told Business Line that after hearing the auto industry’s woes, “we are seized by a sense of urgency (as the excise duty reduction lapses this month)… We are working on it.”

The excise duty on small cars, scooters, motorcycles and commercial vehicles was brought down to 8 per cent from 12 per cent in the interim Budget announced in mid-February by then Finance Minister P Chidambaram.

Duty was cut for SUVs and large cars from 30 per cent to 24 per cent and for mid-size cars from 24 per cent to 20 per cent. The industry has represented to the Modi Government that a continuation of the excise duty cuts is vital to revive the sector whose sales have been on a skid over the last one year.

The Finance Ministry, Seetharaman said, is looking into the issue of whether the Government can continue with the excise duty cuts. She said that “the auto industry has said exactly what the issues are and what kind of redress mechanisms it wants. It is now for us to come up with some kind of a response, in the Budget and beyond the Budget.”

Justifying the need to help automobile manufacturers, the Minister said that the automobiles sector has been setting the bar higher and higher for itself and developed hubs that generate jobs. “The quality of exports is so high that it is worthy of international recognition. The sector is giving us a brand of our own.”

The Minister said that “it is not just about giving out money. It is also looking at what scheme the revenue foregone is going to affect the Finance Ministry and by how much. Both have implications… Giving you a scheme which gives you some resources is one, the other is getting the Finance Ministry to say, ‘forget these resources because it helps in larger exports, foreign exchange earned, and jobs generated’.”

The Government has to convince both sides and make sure the auto industry gets priority, she added. Auto industry bodies, such as the Society of Indian Automobile Manufacturers, have also appealed to the Government for more export incentives, free inter-State movement of vehicles, promotion of electric and hybrid vehicles, prevention of overloading, better road safety, emission and fuel-efficiency norms, and a policy on fleet modernisation and scrappage.

Govt ready to amend Cos Act

Corporate India, which has been lobbying to make the new Companies Act less onerous, has the Government’s undivided attention. The Corporate Affairs Ministry is examining closely all concerns raised by the industry and is open to making changes to the Act and/or the Rules.

“We are going through the suggestions, point by point and clause by clause. We will put it all in a tabular form for us to understand. We will see if modification or tweaking of rules is sufficient or if there is a requirement for an amendment,” Minister for State for Finance and Corporate Affairs Nirmala Seetharaman told Business Line. The new Companies Act, replacing the 1956 law, was passed last year. Many of its provisions are yet to be implemented. India Inc has criticised the new Act for lacking clarity and being too stringent. In the absence of clear clarifications from the Ministry, companies have been interpreting the provisions in different ways.

(This article was published on June 23, 2014)
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