The excise duty concessions for the auto sector is likely to be withdrawn from January 1. This will lead to increase in the vehicle prices.
Duty rates were cut to 24 percent from 30 percent and 27 percent for SUVs and large cars, respectively during the 2014-15 interim budget. Rates were cut to 20 percent for mid-sized cars. The current Modi government continued the concessions till 31 December.
Carmakers had asked the government to extend excise duty relief, saying removal of this incentive could impact car sales. Maruti Suzuki India chairman RC Bhargava had earlier said that withdrawal of excise benefits could hike automobile prices by up to 4 per cent.
If the concessions are not extended, the excise duty on small cars, scooters, motorcycles and commercial vehicles will go up from 8 per cent to 12 per cent. On SUVs, it will be increased from 24 per cent to 30 per cent. For mid-sized cars, the duty will be hiked from 20 per cent to 24 per cent and for large cars, from 24 per cent to 27 per cent.
In an infrastructure-short country, the last thing to do is to ask people to buy cars and SUVs on the cheap without building adequate roads for them.