Government to roll back the excise duty sops on cars from January

The government has announced that the excise duty sops on cars, SUVs, two-wheelers and commercial vehicles will not be extended into the next year. This means that all manufacturers, who had started offering discounts on their products post the announcement of tax sops, might hike the prices again to reflect the increase in excise duties.

In June, the government had announced an extension of the excise duty cut on automobiles for six more months. The concession was first announced in the previous government’s interim budget and was supposed be retracted on June 30, though the positive outlook brought into the industry  by the reduction in excise duties encouraged the government to extend it till the end of this year.

The duty on small cars, motorcycles, scooters and commercial vehicles was reduced from 12 per cent to eight per cent while that on SUVs was cut from 30 per cent to 24 per cent. Subsequently, a majority of car manufacturers passed on these tax benefits to the customers by announcing a cut in prices. Now that the auto sector has finally stabilised, the government has decided to retract the duty cuts, effective from January 1.

"The government is not extending the excise duty concessions on the auto sector," a senior finance ministry official said. With the new tax structure in place, the excise duty for cars will be reciprocated to the previous numbers. Anticipating this move, quite a few manufacturers like Maruti Suzuki, Hyundai and Nissan had already announced a hike in car prices, effective from January 1. While the increasing input costs are equally responsible for the hike in prices, this move might negatively impact the auto the buyers’ sentiment and eventually, the auto industry’s growth.