Indian Auto Firms Pass Tax Cut On To Customers

by Lorys Charalambous, Tax-News.com, Cyprus

12 December 2008

Indian automobile and motorcycle manufacturers have announced, following the unveiling of the government's stimulus package at the weekend, that they will be passing on the benefits of a 4% cut in the rate of the central excise duty (sometimes referred to as Cenvat).

On Sunday, the Indian authorities announced that:

"The three major ad valorem rates of Central Excise duty viz. 14%, 12% and 8% applicable to non-petroleum products have been reduced by 4 percentage points each. The revised rates will be 10%, 8% and 4% respectively."

"Cars, other than small cars, attract composite rates – that are a combination of specific and ad valorem rates. The rates applicable hitherto were ‘24% + INR15,000/-` per unit for cars of engine capacity 1500 cc to 1999 cc and ‘24% + INR20,000/-` per unit for cars of engine capacity of 2000 cc or more (INR15,000 = USD309). The ad valorem component of these rates has been reduced from 24% to 20%."

Auto manufacturers Mahindra & Mahindra, Tata Motors, Ford, Toyota Kirloskar and Maruti Suzuki were among the firms which pledged to pass the cut on to consumers, in an attempt to boost flagging sales in the sector.

Price reductions have also been flagged up by motorcycle makers Hero Honda and Bajaj Auto, among others.

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