Jaitley Extends Temporary Cut in Auto Excise Duty to 31 Dec

Goods in Chapter 84 and 85 to Continue at 10% Excise, Ch. 90 not Covered

In a pre-budget booster shot to the automobile, consumer durables and capital goods sectors, Finance Minister Arun Jaitley on Wednesday, 25 June extended the excise duty cut till December 2014.

(The continuation of the cut in excise on Chapter 84 and 85 to 10% is welcome but the exclusion of Chapter 90 which covers instruments is difficult to understand – Ed.).

Jaitley’s predecessor P Chidambaram had cut excise on Auto industry to boost production in the hope that buoyancy make up the revenue loss. Jaitley is however silent on the revenue impact.

“Any loss from revenue can be made up in the economy in long term. I hope economy benefits from extension of excise duty cuts,” Arun Jaitley said after making the announcement. “Considering the present situation in various sectors, the government today has decided to extend the facility of this reduced excise duty to all those sections for a further period of six months, i.e., they will continue till December 31, 2014,” Jaitley said.

In the Interim Budget presented in February, excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced to 8 per cent from 12 per cent; 24 per cent from 30 per cent for SUVs; 20 per cent for mid-sized car from 24 per cent and 24 per cent for large cars from 27 per cent.

Most of the carmakers initially passed on the benefit of excise duty reduction to customers by cutting product prices. Later, the prices rose again. The excise cuts did not give the expected boost to demand.

India’s automobile industry has been struggling from a prolonged market slump. Car sales in India fell for the second consecutive fiscal in 2013-14 with a drop of 4.65 per cent at 17,86,899 units as compared to 18,74,055 units in the previous fiscal.

In the 2012-13, car sales in India fell 6.69 per cent, which was the first decline in a decade.

Notification No. 06/2014-Central Excise dated 25 June 2014

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 12/2012-Central Excise, dated the 17^th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 163(E), dated the 17^th March, 2012, namely:-

In the said notification, in the opening paragraph, in the second proviso, for the figures, letters and words “30th day of June, 2014”, the figures, letters and words “31st day of December 2014” shall be substituted.

[F.No. 354/85/2014-TRU]