Higher excise duty regime will hurt demand, growth, says Assocham

New Delhi: Industry body Assocham today said the withdrawal of excise duty concessions for cars and durable goods will spell a death knell for the industrial growth and the decision was not in the spirit of Make in India.

“At a time when manufacturing output has been declining by over four per cent (in October) with consumer durables reporting a huge drop of over 35 percent and motor vehicles segment a fall of 9.8 percent, bringing these segments into higher excise duty regime will spell a death knell for consumer demand and industrial growth”.

"This is not surely in keeping with the spirit of Make in India. The Make in India’s first priority should be to revive industrial growth through lower cost of production and lower price tag for the consumer so that demand can be revived," Assocham Secretary General DS Rawat said.

Cars, SUVs and two-wheelers will become expensive from 1 January with the government deciding not to extend the reduced excise duty rates provided to the sector.

In order to boost the auto sector, the previous UPA government had cut excise duty on cars, SUVs and two-wheelers in the interim Budget in February.

“We will certainly like demand revival to be the top priority and this will not happen by raising excise duty, which will then be passed on to the consumers,” Rawat said.

The industry chamber believes that the move to restore the excise duty to 12 per cent and above for motor vehicles and consumer durables will not lead to higher tax collections.

“To the extent, the government seeks higher duty, the sales volume will drop beyond that. It will be a counter-productive move even from taxation point of view,” it said.

During the UPA regime, excise duty was reduced to 24 percent from 30 percent in the case of SUVs, 20 percent for mid-sized car from 24 percent and 24 percent for large cars from 27 percent.

In June, the new government led by Narendra Modi extended the excise duty concession by six months to 31 December, which is not being further extended.

After two successive years of sales slump, the auto industry had shown growth of 10.01 percent in April-November period this fiscal at 1.33 crore units as against 1.21 crore units in the year-ago period.

In November, car sales in India rose by 9.5 percent in November riding on continued relief in excise duty and lower fuel prices, after declining for two months in a row.

Domestic car sales in November stood at 1,56,445 units, up 9.52 percent as compared to 1,42,849 units in the same month of 2013, according to the data released by Society of Indian Automobile Manufacturers.

Car makers had been asking the government to extend excise duty relief, saying removal of this incentive could push the industry into a negative territory.

PTI