The auto industry is terming Budget 2011-12 a pleasant surprise. While relieved that excise rates have not been increased as previously thought, the industry is disappointed that the 12 per cent tax differential between small and large vehicles remains unchanged.

“We're relieved that diesel vehicles have not been additionally taxed. The Finance Minister has rectified certain anomalies in the excise duty structure, like tax refund extended to vehicles with seating capacity up to 13 persons (which was not available earlier) and exempting factory-built ambulances from additional excise duty. The industry, however, was expecting some rationalisation of excise duty on larger cars and utility vehicles, at least removal of the additional excise duty of Rs 15,000 from such vehicles, which was not announced. There were also expectations of a drop in excise on fossil fuels, which has not happened,” said Dr Pawan Goenka, President, SIAM and President, Automotive and Farm Equipment Sectors, Mahindra & Mahindra.

“We were also hoping for some incentive for putting old vehicles off the road. The Budget was on expected lines,” said Mr Karl Slym, President and MD, General Motors India. Other announcements by the Finance Minister will also benefit the auto sector. Higher budgetary allocations for infrastructure and agriculture would boost demand for commercial vehicles, agricultural and construction equipment. Further, with rising input costs a major worry, the increase in iron ore export duty to 20 per cent may also bring down local steel prices. More sops have also been announced for electric vehicles and hybrids.

Mr Kumar Kandaswami, Leader Manufacturing, Deloitte said, “The increased allocation to the infrastructure, housing and agriculture sectors would significantly boost the demand for commercial and off-the road vehicles. The focus on the cold chain and warehousing will generate demand for refrigerated and insulated vehicles. The increase in priority sector limits to banks would also sustain demand. Given the focus on rural areas, market opportunities for auto manufacturers will continue to grow, driving them to have robust rural strategies.”

Key proposals

Full exemption from basic customs duty and a concessional rate of Central Excise duty of 4 per cent provided to specified parts of electrical vehicles on actual-user basis extended to batteries imported by such manufacturers for the replacement market.

Concessional excise duty of 10 per cent extended to vehicles based on fuel cell or hydrogen cell technology for the automobile sector.

Hybrid vehicles enjoy a concessional excise duty rate of 10 per cent. However, import dependence for their critical parts/sub-assemblies is still quite high. Specified parts of such vehicles will be granted full exemption from basic customs duty and special CVD. In addition, a concessional rate of excise duty of 5 per cent is being prescribed to incentivise domestic production.

A technology has been developed indigenously for converting fossil fuel vehicles into hybrid vehicles through fitment of a kit; excise duty on such kits and their parts reduced to 5 per cent from 10 per cent. Excise duty on LEDs is being reduced to 5 per cent and special CVD is being fully exempted. Basic customs duty on solar lanterns reduced from 10 per cent to 5 per cent. Basic customs duty on a few more inputs used in making solar modules/cells is being reduced to nil.

Related Topics
comment COMMENT NOW