Finance minister Arun Jaitley has announced that the reduction in excise duty put in place by the previous government will not be rolled back immediately but instead, will be extended till the end of this year.
This is excellent news for both the car buying public and the Indian automotive industry itself. Car manufacturers stand to benefit a lot from this decision as the reduced excise duty meant a lower cost of inputs and a greater demand for vehicles. Car sales did indeed rise during the month of May but if the decision to not hike excise duty was not made, automotive firms would have been forced to increase the prices of their models and possibly create a downturn of sales yet again.
During the interim budget presented during February of this year, the excise duty of cars, two wheelers and commercial vehicles was lowered from 12% to 8%. Similarly, the excise duty of SUVs in India also saw a reduction to 24% from the earlier 30%. Mid-size cars and large cars saw excise duty cuts from 24% to 20% and from 27% to 24% respectively.