Auto Firms Seek Clarity on Budget Customs Duty Clause.

Ambiguity relating to the import of auto parts in the Budget announced this week has led to confusion among auto manufacturers.

While not finding mention in the finance minister's speech, the Customs Memorandum of the Budget carries a clause stating: “A definition for 'Completely Knocked Down (CKD) unit' of a vehicle including two wheelers, eligible for concessional import duty, is being inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or a chassis where any of such parts or sub-assemblies is installed.”

This ostensibly means that companies that were bringing auto parts into India to assemble units will not be able to avail of concessional import duty. At present, a Completely Built Units (CBUs) attract a duty of nearly 110 per cent while Semi-Knocked Down (SKD) units attract an import duty of around 62 per cent. The 10 per cent concessional duty on CKDs appears to have now been disallowed for two- and four-wheeler manufacturers who import engines, gearboxes, transmissions or chassis before assembly. The Budget clause could see auto manufacturers who were importing semi-assembled units and installing parts mentioned in the clause, will no longer be able to take advantage of the lower 10 per cent duty. They could instead be charged 62 per cent, with additional taxes, taking up prices of their vehicles by a large amount.

Source : indianexpress.com