Big cars in line for excise cut

Good news for automobile companies could be on the way. Budget 2007-08 is likely to cut excise on big cars to 16 per cent from 24 per cent now.

Good news for automobile companies could be on the way. Budget 2007-08 is likely to cut excise on big cars to 16 per cent from 24 per cent now. This will bring all automobiles under a uniform excise duty rate.

The Budget for the current fiscal had reduced excise on small cars to 16 per cent from 24 per cent. Small cars have been defined as those less than 4 metres in length and with an under-1,200 cc petrol engine capacity or 1,500 cc diesel. Last year8217;s Budget had also reduced the duty on raw material, which is now between 5 per cent and 7.5 per cent compared with 10 per cent earlier.

Government officials said the proposal had the backing of the heavy industries ministry, too. The government has been working on a long-term strategy to make India one of the largest carmakers in the world and attract more foreign investment in the sector. Worldwide, India is the 11th largest carmaker in the world and small cars account for 80 per cent of the total domestic volumes.

8220;This is part of the long-term vision for the auto sector. We expect this move to result in increased sales and demand,8221; a government official said.

The Indian automotive industry is currently worth about 32 billion and is projected to grow to over 145 billion by 2016. It is expected to double its contribution to the GDP from the current 5 per cent to 10 per cent. The industry has so far attracted investments worth over 12 billion, with about 8 billion in the pipeline, according to government estimates.

Another initiative proposed by the automobile industry and the heavy industries ministry is to support cars containing more locally sourced components.

Currently, excise concessions are available for three years for products developed in India subject to the products being designed and developed by a company owned wholly by an Indian and the product being patented in any two countries, excluding India.