Cars, two-wheelers, mobile prices set to fall as Chidambaram cuts duty

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Price of cars and two-wheelers are set to come down after Finance Minister P Chidambaram announced a reduction in excise duty on small cars, motorcycles and scooters from 12 per cent 8 per cent.

Mr Chidambaram also brought down excise duty on large and mid-segment cars from 27-24 per cent to 24-20 per cent, while duty on Sports Utility Vehicles or SUVs has been brought down to 24 per cent from 30 per cent.

The cut in duty will be applicable up to June 20, 2014, when the new government is likely to present the full year budget. (Read: Everything you need to know about Chidambaram’s interim budget)

cars & mobiles
Vikram Kirloskar, president of auto industry lobby SIAM said the reduction in excise duty would reduce the acquisition price thereby making vehicles more affordable. This would improve the consumer sentiment and hopefully revive the demand for vehicles, he added.

Mr Chidambaram’s duty-cut is aimed to spur domestic manufacturing at a time when India’s economy is growing at the slowest pace in a decade. Industrial output has fallen 0.1 per cent in the first nine months of 2013/14 fiscal year, and annual car sales declined by about 5 per cent in 2013.

Vijay Mantri, chief executive of Pramerica Asset Managers said the interim budget is positive for the auto industry given the long awaited excise duty cuts, but it also depends on whether the next government will continue this or not.

The BSE Auto index closed 0.8 per cent higher, outperforming the broader Sensex, which closed up 0.5 per cent. (Track auto stocks)

The finance minister also cut duty on consumer durables from 12 per cent to 10 per cent. He also announced that the excise duties on mobile handsets will be restructured to six per cent for all categories.

“To encourage domestic production of mobile handsets (which has declined) and reduce the dependence on imports (which have increased), I propose to restructure the excise duties for all categories of mobile handsets,” Mr Chidambaram said.

Radhika Rao of DBS, however, said that the cut in the excise duties will have a bearing on the indirect tax takeaways, putting revenue targets at risk.

Following is a list of what will be cheaper:

  • Small cars, scooters, motorcycles: Excise duty on small cars, motorcycles, and scootershas been cut to 8 per cent from 12 per cent earlier
  • Sports utility vehicles (SUVs): The sports utility vehicles will attract 24 per cent excise duty, down from 30 per cent earlier
  • Large cars: These cars that used to attract excise duty of 27 per cent will now be levied only 24 per cent.
  • Mid-sized cars: The excise duty on mid-sized cars will be 20 per cent from 24 per cent earlier
  • Commercial vehicles: Excise duty on commercial vehicles has been cut to 8 per cent from 12 per cent
  • Consumer durables: The excise duty on consumer durables has been cut from 12 per cent to 10 per cent.
  • Mobile phones made in India: Mobile phones manufactured in India could also see price moderation with the Finance Minister announcing a proposal to boost domestic manufacturing
  • Soaps: The finance minister rationalised customs duty structure on non-edible grade industrial oil and its fractions, fatty acids and fatty alcohols at 7.5 per cent
  • Rice: It can also be expected to be cheaper with the finance minister exempting service tax on loading, unloading, packing, storage and warehousing of the commodity.
  • Charges of cord blood banks: People looking to store umbilical cord blood for future use can now be expected incur lower expenses with the service tax of 12 per cent on cord blood banks being withdrawn


(With inputs from Reuters)

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