Moneycontrol
Last Updated : Feb 28, 2015 02:13 PM IST | Source: Moneycontrol.com

Union Budget 2015: Customs duty on commercial vehicles raised to 40% from 10%

Auto sales have been under pressure for the last few months with the economy still to show signs of a recovery. The pick-up around the festive season too has not been maintained. Furthermore, the withdrawal of excise cut forced auto makers to increase prices, thereby affecting sales.

 
 
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Kankana Roy Choudhury
moneycontrol.com

In a major setback to auto industry, Finance Minister Arun Jaitely has announced a hike in the customs duty on commercial vehicles. The FM increased the duty to 40 percent from the current 10 percent.


However, on the brighter side, to give a boost to the government's green theme he has waived off duty on electric & hybrid vehicles. Furthermore, the FM has allocated Rs 75 crore for electric vehicles.

Auto analysts do not see this benefitting domestic CV majors like Tata Motors and Ashok Leyland in a big way. That is because it affects only the high end hydraulic power steering CVs produced by players like Volvo and Mercedes. According to CNBC-TV18, only 500-1000 high HP CVs are imported annually.


There was no other announcement for the auto sector.

Auto sales in general have been under pressure for the last few months with the economy still to show signs of a recovery. The pick-up around the festive season too has not been maintained. Furthermore, the withdrawal of excise cut forced auto makers to increase prices, thereby affecting sales.


In its interim Budget (February 2014), the UPA government had cut excise duty on scooters, motorcycles and commercial vehicles to 8 percent from 12 percent previously. For SUVs, it was cut to 24 percent from 30 percent; for mid-sized cars to 20 percent from 24 percent and for large cars to 24 percent from 27 percent earlier.


The new NDA government, after assuming power, extended the sops till December 31, 2014, which otherwise would have expired in June. Finance Minister Arun Jaitely refrained from making any other announcement on the sector in his maiden Budget speech in July.


Following were the expectations from the industry:


*Another duty cut in the Budget, which would have helped boost demand by reducing prices. It also expected government to retain a high customs duty (in excess of 125 percent at current rate) on imported cars, making Indian brands more competitive.


* Special tax incentives and better infrastructure. Moreover, to encourage customers, it was also seeking lower interest rates, which would reduce vehicle costs.

* The Jawaharlal Nehru National Urban Renewal Mission (JNNRUM), which ended on March 31, 2014, to be replaced by a new scheme. CARE Ratings feels the move would be positive for the industry as it would provide much needed support to bus manufacturers in terms of purchase by state transport units (STUs) on a pan-India basis.

* Continuation of interest rate subvention scheme for farmers. At present, the short-term crop loans to farmers stands at 7 percent p.a. and an additional subvention of 3 percent is given to prompt-paying farmers. It also wanted an increase in agri-credit from the current Rs 8,00,000 crore.

First Published on Feb 28, 2015 01:17 pm
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