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Feb 26, 2013, 11.20 PM IST | Source: Moneycontrol.com

Budget 2013: FM should reduce excise rates on autos says expert

The Indian automobile sector has carved its niche as one of the fastest growing industrial sectors in the last few years.

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The Indian automobile sector has carved its niche as one of the fastest growing industrial sectors in the last few years. From the two and three wheeler segment to the passenger car markets, Indian auto sector has witnessed a phenomenal growth story. While India is expected to become the third largest automobile market of the world, the once sluggish luxury car segment is estimated to contribute almost three per cent of the overall passenger car market by the year 2020.

The last few years have been bitter sweet for the Indian automobile sector as a whole. While the overall unit volume sales in the auto sector have more than doubled to 20 million units in fiscal 2012, the raising of excise duty in the last budget session on all types of vehicles by 2%-3% has dented the market. With 3% a decline in overall export volume sales in the first ten months of fiscal 2013 over year, the Indian automobile sector is hoping that the government addresses some of its grievances in the annual budget of 2013.

The biggest and the most common expectation across the automobile industry is the reduction of excise duty rates. Industry experts and manufacturers are hoping for a reduction in excise duty from the current 12% to 10% for small cars and commercial vehicles and from 25% and 27% to 22% for large cars and utility vehicles. Although the likelihood of such a cut in excise duty remains moderately low, excise duty cuts can bring a positive kick start in the sluggish sales with all manufactures and OEMs likely to pass on the duty cut to the end customers.

Commercial vehicles and bus manufactures are expecting a decision on the possible extension of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) Scheme. The scheme if extended is likely o be positive for commercial bus manufactures allowing them to provide much needed support to the bus manufacturers in terms of purchase of new buses by STU's on pan India basis.

The automobile sector also has high expectations for quick implementation of the proposed Goods and Services Tax (GST) system. The GST plan when implemented is likely to boost consumer sentiment that can arrest the ongoing fall. With GST allowing for a uniform level playing field for the manufactures, industry experts are hopeful that the government would indeed focus its attention towards framing a proper GST mechanism in the budget later this month.

Clarity of proposed diesel tax pricing is another sensitive topic that most automobile manufactures wants the government to address in this budget. The industry is keeping its fingers crossed over the proposed diesel tax on diesel-powered vehicles that can be detrimental to the growth. If such a diesel tax is indeed passed in the budget session, it is likely to reduce diesel automobile sales in what is currently a sluggish market.

Since the automobile sector is directly related to a number of tax proposals a number of indirect tax sops can benefit the sector immensely. Continuation Interest Rate subvention scheme for farmers and increase in agri credit scheme for the farmers under the Rural Development program can boost tractor and two wheeler sales while flexible labor reforms to contain strikes in industrial units can be a soothing touch for attracting more FDI. Also any positive move from the finance ministry in increasing the overall allocation towards the National Highways and Development program is also likely to improve the overall sales figures of the sector.



 

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