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Govt considering slashing excise duties to spur domestic automobile sales

Thursday, September 6, 2007

The government is considering slashing excise duties to spur domestic automobile sales, which has seen a slide in the first four months of this fiscal, reports the DNA Money. Union heavy industries minister Santosh Mohan Deb said on Wednesday that he has written to the finance ministry with suggestions, including slashing excise duties, to spur domestic automobile sales growth.

“In the first four months of this year, the performance of the automobile sector has been lower than what we had envisaged. We are keenly watching the outcome in the second quarter. If need be, we will certainly intervene to sustain growth… We have written to the finance ministry for further excise deduction,” Deb said.

In the first four months of this fiscal, passenger car sales grew by only 13.03% and commercial vehicles by a mere 2.06%. Two-wheeler sales nosedived and three-wheeler offtake was also uninspiring.

Since all vehicles — except cars which are not classified small — already attract a 16% excise duty at present, the latest move may cap 16% as the maximum excise levy for all vehicles. Last year, when finance minister P Chidambaram announced an excise relief for small cars, putting them in the lower excise bracket of 16%, many passenger car makers called for its extension to all vehicles. Cars longer than 4 metres and fitted with engine displacements of over 1,200 cc (petrol) or 1,500 cc (excise) continue to be charged 24% excise at present.

Deb also appears keen to boost automobile exports. He has initiated a dialogue with the commerce and industry ministry on an incentivisation package - for the first time. While he declined to provide details, industry experts point out that it could well be a target-plus scheme. This scheme, which was considered some years back for many other sectors, could entitle auto companies which meet a certain export target for benefits such as import licences for items which are on the negative list and market development assistance etc.

“Like Germany, we will seek a minimum amount on volume of exports, over which there will be a reduction in taxes,” he said. Exhorting vehicle makers to look for export markets, if sales in domestic market are unsatisfactory, Deb said the government would do everything possible to incentivise exports.

Posted by FR at 7:08 PM  

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