Friday, March 28, 2008

Comparison of Excise duties imposed on various forms of automobiles before and after budget 2008


Before the announcement of the annual budget 2008 it was speculated that the Government would like to keep the auto industry robust because it also affects transportation of goods in the country. As part of the rationalization of duty rates, the Government has brought down the excise duty rates from a whopping 40 per cent in 2001-2002 to 16/24 per cent in 2007-08.The demand of the industry was to eliminate tax inefficiencies on the input side and also lower duty/tax rate on some category of finished vehicle.Here's what Venu Srinivasan, CMD, TVS Motors expected from the Budget"We are not expecting any significant changes in this year's Budget. There would be no change in excise duties as there is a pricing deficit. No favorable changes are expected for the two-wheeler industry as we have not made any proposal"
On 29th February the Budget 2008 has finally brought welcome relief to the auto sector, which was otherwise spinning under a slowdown caused by firm interest rates.Mr. P. Chidambaram, Finance Minister on Friday, has announced a surprise cut in excise duty for small cars (4,000 mm in length and engines with 1.2 litres capacity, if petrol or 1.5 litres capacity, if diesel) from 16% to 12%. With this move, small cars will cost Rs. 7000 to 16000 less. Maruti Suzuki, a major listed player in the passenger car market, will be the main beneficiary.The company has announced a reduction in prices of some of its models following Finance Minister P. Chidambaram's proposal. The models are Maruti 800, Omni, Zen, WagonR, Swift Diesel and Alto.

Commercial vehicles, too, stand to beneficiated with the budget proposal. The excise duty on buses has been reduced to 12% while on trucks it was reduced to 14%. It is anticipated that the reduction will bring down prices by Rs 20,000-Rs 40,000.Excise duties on hybrid cars have also been reduced by 14% to 24% and on two and three-wheelers to 16% from 24%.


Though Mr. VENU SRINIVASAN, CHAIRMAN, TVS MOTOR CO LTD was not expecting any significant changes in this year’s budget, this is how he reacted on the announcement of the budget 2008-"I warmly welcome the lowering of the excise duty from 16 percent to 12 percent in the annual budget 2008 and the support given by the finance minister to the automotive sector, as it is the engine of any economic growth. At a time when the two-wheeler industry is going on a downturn, this will come as a shot in the arm to reverse the trend."

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