Auto CKD Imports To Be Taxed At 30%.

The auto industry may be a high revenue generator for the government, but some of the recent policy decisions do not consider this sector’s importance to the exchequer.

Consider this: after a lot of deliberations, the government has introduced a new slab in the budget, which will tax certain completely knocked down (CKD) kit imports at 30%. In this year’s budget the government had proposed 60% tax.

Any kit, which includes pre-assembled engines or gearboxes for either cars or two-wheelers, will have to pay this hefty levy - this virtually includes all CKD imports since engines and gearboxes are typically the last products to be localised.

Of course, the new duty would adversely impact assembly operations of luxury car makers such as BMW and Audi besides bike makers such as Harley Davidson. Spokespersons for both BMW and Audi in India declined to comment on the CKD duty issue. Earlier, senior Audi officials were quoted as saying they will review business in India if the CKD levy were to continue.

Not just luxury car makers, other vehicle makers would also be hit in their respective CKD operations. Industry veterans point out that Suzuki Kizashi, Hyundai Santa Fe, products from the Jaguar Land Rover range, which Tata Motors was planning to import in CKD condition for assembly and sale in India - all these products and their possible assembly here would now be impacted.

After the Ssangyong buyout, Mahindra & Mahindra had also spoken of bringing some of the Korean company’s flagship products to India as CKD - these plans are also likely to get impacted adversely owing to the new import duty levy.

But it is not just the CKD levy that is making vehicle makers see red.

Even the issue of easing excise duty on utility vehicles (UVs) has not been addressed for many years now. The industry has been seeking lower excise - at present UVs are taxed at 20% alongside other big cars - for these vehicles saying they are primarily for use in rural areas and hence should be differentiated from sports utility vehicles (SUVs). Even the Ministry of Heavy Industries (which is the administrative ministry for automobiles) is in favour of such a move, having repeatedly asked the finance ministry to lower excise on UVs by 4-5 %.

In the 220th report of the Committee on Industry, Heavy Industries ministry has said it has recommended, at various stages in the past that the finance ministry bring down excise duty on multi-utility vehicles 4-5% from the existing 20%.

It has also recommended withdrawal of additional excise duty of Rs15,000 imposed on all cars, other than small cars, and has also asked for increasing depreciation rates on vehicles from 15% to 20%.

Source : dnaindia.com