In a move that could impact the automobile sector, the infrastructure cess introduced in this year’s Budget may be applicable to completely-knocked-down (CKD) units imported into India, a senior Finance Ministry official has indicated.

The automobile sector is already faced with some sales growth slowdown due to weaker demand in the economy.

The industry would do well to quickly seek clarification on this front, Alok Shukla, Joint Secretary, Tax Research Unit, said at a post-budget event organised by the Confederation of Indian Industry here.The budget provision on infrastructure cess does not specifically exclude CKD units, it was noted.

Already, automobile majors such as Maruti have upped prices across their range by up to ₹34,500 to offset infrastructure cess.

Expert take Maruti Chairman RC Bhargava has reportedly said that the budget proposal to levy infrastructure cess on the car industry would hit manufacturing and job creation in the country.

Any move to impose infrastructure cess on imported CKD units would lead to double taxation, R Muralidharan, Senior Director-indirect taxes, Deloitte in India, told BusinessLine .

“First, the CKD units will attract infrastructure cess on imports. Then once assembled, the end product too, will attract infrastructure cess when cleared from factories,” he said. Moreover, as per the proposal, no credit of this infrastructure cess would be allowed and this cannot be paid out of Cenvat credit.

Budget proposal Expressing concern over pollution and traffic in Indian cities, Finance Minister Arun Jaitley had in this year’s budget imposed infrastructure cess of one per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars meeting certain specifications and four per cent on other higher engine capacity vehicles and special utility vehicles.

The government hopes to collect ₹3,000 crore next year (2016-17) from this cess.

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