Annual General Budget 2015: 11 Main Pointers for Automobile Industry

With every general budget we have expectations; some get fulfilled while some are ignored. While a lot of the India Inc seems neutral or joyed by Mr Jaitley’s presentation last Month, the automotive sector sees it with rather skeptical eyes.

If it has got you perplexed, we quickly jot down the important pointers which will help you decipher the areas which affect you.

Key Pointers

1. While everyone expected some big announcement in terms of electric vehicles, the sops were rather limited. The government continues to extend concessional customs and excise duty rates on specified parts of electrically operated and hybrid vehicles till the end of financial year 2015-16.
2. Customs duty Completely Knocked Down (CKD) units of electric vehicles shall continue to be 10 per cent.
3. The government has proposed to launch a new scheme for Faster Adoption and Manufacture of Electric Vehicles with an initial allotment of 75 crores.
4. The infrastructure sector continues to be favoured by the government and gets a 70,000 crore boost, a major portion of which will be used to build 1 lakh km of roads/highways. Wondering where is this money coming from? Well remember the extra 4 bucks of excise you are going to be paying on petrol and diesel (about which we will talks later)!
5. While almost every manufacturer expected a drop in excise duty on cars and motorcycles which had been recently increased (with effect from January 1, 2015), hopes were crashed as the government rounded off the excise duty rate from 12.36 per cent to 12.5 per cent. This extra 0.14 per cent of excise might affect the prices of hatchbacks and compact sedans, although whether or not the manufacturer will shun the load on customers or not is a different tale altogether.
6. Foreign subsidiaries and Joint Ventures from now on shall be treated as Residents of India as long as their effective management is in India.
7. Setting up of manufacturing plant in notified backward areas of Andhra Pradesh and Telengana will be easier thanks to additional investment or depreciation allowance to new plants.
8. Excise duty on chassis of ambulances has been reduced from 24 per cent to 12.5 per cent.
9. Boosting the commercial sector which has so far been in red, the Finance Minister decided to raise the effective rate of basic customs duty to 20 per cent from 10 per cent. This will help domestic manufacturers like Tata and Mahindra fight against the bigwigs like Volvo and Scania.
10. Customs duty on CKD kits of commercial vehicles will continue to be 10 per cent.
11. A major setback though has been on the prices of petrol and diesel. While the educational cess, higher educational cess and CENVAT (Central Value Added Tax) were revised, a sharp jump from Rs 2 per litre to Rs 6 per litre was made on effective Customs/excise duty on petrol and High Speed Diesel. This duty has been given the name road cess!