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Higher excise duty to hit demand, industrial growth: Assocham

Cars, SUVs and two-wheelers will become expensive from January 1 with the government deciding not to extend the reduced excise duty rates provided to the sector.

Press Trust Of India

Updated:December 31, 2014, 5:07 PM IST
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Higher excise duty to hit demand, industrial growth: Assocham
Cars, SUVs and two-wheelers will become expensive from January 1 with the government deciding not to extend the reduced excise duty rates provided to the sector.
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New Delhi: Industry body Assocham on Wednesday said that the withdrawal of excise duty concessions for cars and durable goods will spell a death knell for the industrial growth and the decision was not in the spirit of Make in India.

"At a time when manufacturing output has been declining by over four per cent (in October) with consumer durables reporting a huge drop of over 35 per cent and motor vehicles segment a fall of 9.8 per cent, bringing these segments into higher excise duty regime will spell a death knell for consumer demand and industrial growth."

"This is not surely in keeping with the spirit of Make in India. The Make in India's first priority should be to revive industrial growth through lower cost of production and lower price tag for the consumer so that demand can be revived," Assocham Secretary General DS Rawat said.

Cars, SUVs and two-wheelers will become expensive from January 1 with the government deciding not to extend the reduced excise duty rates provided to the sector. In order to boost the auto sector, the previous UPA government had cut excise duty on cars, SUVs and two-wheelers in the interim Budget in February.

"We will certainly like demand revival to be the top priority and this will not happen by raising excise duty, which will then be passed on to the consumers," Rawat said.

The industry chamber believes that the move to restore the excise duty to 12 per cent and above for motor vehicles and consumer durables will not lead to higher tax collections.

"To the extent, the government seeks higher duty, the sales volume will drop beyond that. It will be a counter- productive move even from taxation point of view," it said. During the UPA regime, excise duty was reduced to 24 per cent from 30 per cent in the case of SUVs, 20 per cent for mid-sized car from 24 per cent and 24 per cent for large cars from 27 per cent.

In June, the new government led by Narendra Modi extended the excise duty concession by six months to December 31, which is not being further extended. After two successive years of sales slump, the auto industry had shown growth of 10.01 per cent in April-November period this fiscal at 1.33 crore units as against 1.21 crore units in the year-ago period.

In November, car sales in India rose by 9.5 per cent in November riding on continued relief in excise duty and lower fuel prices, after declining for two months in a row. Domestic car sales in November stood at 1,56,445 units, up 9.52 per cent as compared to 1,42,849 units in the same month of 2013, according to the data released by Society of Indian Automobile Manufacturers. Car makers had been asking the government to extend excise duty relief, saying removal of this incentive could push the industry into a negative territory.

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