Sports Utility Vehicles (SUVs) excise duty reduction was pegged at 24% from 30%. Initially applicable till June 30, 2014, Central Government extended excise duty relief on automobiles till December 31, 2014 to support sales volume growth. Sustaining that growth now is tied to economic recovery. As Government of India looks to withdraw tax breaks in 2015, cars, and bikes will be costlier.
Indian auto industry tax relief extension to be stopped
Current excise duty concessions are not being renewed, and end today having been introduced by the former Congress government to revive auto sales. To that end, some success has been reported with a number of auto manufacturer’s reporting positive sales through 2014. The new government extended tax relief after coming into power earlier this year. But the Christmas party is now over, and the government will resort to regular taxation of the Indian auto industry.
Alongside, Reserve Bank of India’s (RBI’s) expected postponement of a rate cut does not boost auto sales recovery. Vehicle Purchase Sentiment Index over the next 6 months is sketchy. In all, Indian auto industry enters 2015 on a slow note, and will be put through trying times to report positive FY ending in March 2015. Sales recovery is expected later in 2015 putting pressure on Q1 2015.
As the onus of any healthy government lies with the government itself, it’s time to make at least one important change. India needs dependable public transport, better roads, and improved infrastructure. That itself would take pressure of common folk to buy cars even when it’s not justified, and overall better infrastructure would mean does who own vehicles don’t puncture them or lose alignment as often as it happens. In the meantime India has also embraced deregulation of diesel price.