Auto-makers Urge Commerce Ministry To Extend Validity Of Excise Duty Cut

Automobile manufacturers recently met Commerce Minister Nirmala Sitharaman to convince her to extend the validity of excise duty cuts on cars, two-wheelers and commercial vehicles beyond June 20.

The industry has also sought reduction in excise duties on large cars and lowering of duty slabs for the sector to boost domestic demand.

The minister, in a meeting with the industry chambers last week, had questioned the need for budgetary concessions for the automobile industry. However, in Monday’s meeting, the members of the Society for Indian Automobiles Manufacturers (SIAM) had more opportunity to justify their demands. The meeting specifically focused on the automobile industry.

The industry also talked about falling sales of automobiles and the need to motivate the sector to spur manufacturing. This, in return, will increase employment, an official added. Domestic sales of passenger vehicles in 2013-14 were 6% lower than the previous year while exports remained flat.

“Discussed issues facing automobile industry with representatives of SIAM,” Sitharaman tweeted after her meeting without revealing the government’s stand.

While Modi-led BJP government may consider retaining lower excise slabs, a further reduction in excise looks difficult due to the existing budgetary constraints, the official said.

In the interim Budget announced in the middle of February by the then Finance Minister P Chidambaram, excise duties on small cars, scooters, motorcycles and commercial vehicles were brought down to 8% from 12%. Duty cuts were also made for larger cars and SUVs from 30% to 24% and for mid-size cars from 24% to 20%.

In a letter to the revenue secretary last month, SIAM had sought further lowering of duties on large cars to 20% from 24%. It also urged top-level bureaucrats to simplify the excise duty slabs on cars by moving to a two-tier system from a three-tier system.

Earlier, the automobile industry had a five-tier duty structure. It was later reduced to a three-tier structure in the interim Budget, ranging between 8% and 24%.

The industry contributes 25% to the manufacturing GDP and comprises 18% of the total excise collection while employing 19.5 million people, revealed SIAM.