Automobiles and consumer electronics goods are set to become costlier, as the Finance Ministry has decided not to extend excise duty concessions beyond December 31.

Central excise duty is levied on a manufactured product at the factory gate and is included in the maximum retail price that a consumer pays.

“Keeping revenue considerations in mind, the duty cut will not continue,” a senior Finance Ministry official told BusinessLine .

However, the Heavy Industry Ministry has sought a two-month extension of the excise relief for the automobile industry. “At the ‘Make in India’ workshop on Monday, officials from the Heavy Industry Ministry stressed the need for continued fiscal support to the automobile industry to help it stay on the growth track,” said a Government official.

Ministry representatives argued that car and other vehicle manufacturers were facing a tough time due to low and inconsistent demand and re-imposing higher excise duty will force them to increase prices, which would further lower sales, the official added.

The automobile industry has said the excise duty roll back will hurt January sales as prices are expected to go up 4 per cent. “It will certainly impact January sales. But over time, people will get used to it,” said RC Bhargava, Chairman, Maruti Suzuki India.

Rakesh Srivastava, Senior Vice-President, Sales & Marketing, Hyundai Motor India, said the Government had extended the duty cut for a few months, but the industry could not recover due to various economic factors.

In the interim Budget, on February 16, 2014, the UPA Government had lowered excise duty on small cars, motorcycles, scooters and commercial vehicles to 8 per cent from 12 per cent; on sports utility vehicles to 24 per cent from 30 per cent; on mid-segment cars to 20 per cent from 24 per cent; and on large cars to 24 per cent from 27 per cent. Similarly, on capital goods and some consumer items, the levy was cut to 10 per cent from 12 per cent.

The duty cut was intended to boost the manufacturing sector. In April-October, the manufacturing growth stood at a mere 0.7 per cent, though the standalone data of October recorded a negative growth of 7.6 per cent.

The excise duty cut, which was supposed to end on June 30, 2014, was extended by the Modi Government up to December 31.

Tax collection

With the roll-back of duty cut, the Finance Ministry expects to garner ₹3,000 crore annually, with ₹750 crore in the remaining three months of this fiscal.

“This will help lower the shortfall in indirect tax collection,” another Finance Ministry official said. The Budget has set a tax collection target of ₹6.23 lakh crore, with an asking rate of 25.8 per cent.

However, for April-November the actual collection was ₹3.29 lakh crore, with a growth rate of little over 7 per cent. The Taxman has initiated a number of measures to bridge the shortfall. First, it raised excise duty on petrol and diesel twice, and then raised duty on edible oils.

The tax authorities have also initiated measures to collect recoverable arrears of over ₹20,000 crore.

The Finance Ministry needs to mobilise more to offset the impact on the fiscal deficit.

The Budget target for the deficit is ₹5.31 lakh crore, of which nearly 90 per cent has already been exhausted in the first seven months (April-October) of the current fiscal.

Now, eyes are on the deficit number for the April-November period which will be released on Wednesday.

With additional inputs from S Ronendra Singh

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