Come New Year, the prices of automobiles and consumer durables will go up as the government Tuesday decided not to extend the reduced excise duty rates provided to these sectors beyond tomorrow.
"The government is not extending the excise duty concessions on the auto sector and consumer durables," a senior finance ministry official said.
The move is expected to help the government raise additional revenue in the remaining three months of the current financial year to achieve the fiscal deficit target of 4.1 percent of GDP.
The previous UPA government, in order to boost the two sectors that were struggling in the wake of economic downturn, had cut excise duty on cars, SUVs, two-wheelers and consumer durables in the interim Budget in February.
Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced 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 to 24 percent for large cars, from 27 percent.
In the consumer durables sector the excise was reduced to 10 percent from 12 percent.
In June, the new government led by Prime Minister Narendra Modi extended the excise duty concessions by 6 months to December 31, which is now not being further extended.
While companies are still awaiting a formal communication and working out on the subsequent details of price hike, Honda Cars India Senior Vice-President (Marketing and Sales) Jnaneswar Sen told PTI: "Prices will go up as a result of this decision. This move will also impact demand in the short term."
Expressing similar views, Maruti Suzuki India Chairman R C Bhargava said: "It is a government decision. We don't have any option but to accept it. It will have an impact on sales.
I believe sales will slow down in the short term due to this development."According to an analysis by CNBC-TV18, if excise duty benefits expire, car prices will increase anywhere between Rs 8,000-20,000. The rollback will also have a disastrous impact on auto car sales which are already reeling under pressure as the demand for automobiles is yet to improve.
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