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Cars, two-wheelers, mobile prices set to fall as Chidambaram cuts duty

Cars, two-wheelers, mobile prices set to fall as Chidambaram cuts duty

Price of cars and two-wheelers are set to come down after Finance Minister P Chidambaram announced a reduction in excise duty on small cars, motorcycles and scooters from 12 per cent 8 per cent.

Mr Chidambaram also brought down excise duty on large and mid-segment cars from 27-24 per cent to 24-20 per cent, while duty on Sports Utility Vehicles or SUVs has been brought down to 24 per cent from 30 per cent.

The cut in duty will be applicable up to June 20, 2014, when the new government is likely to present the full year budget. (Read: Everything you need to know about Chidambaram's interim budget)

Vikram Kirloskar, president of auto industry lobby SIAM said the reduction in excise duty would reduce the acquisition price thereby making vehicles more affordable. This would improve the consumer sentiment and hopefully revive the demand for vehicles, he added.

Mr Chidambaram's duty-cut is aimed to spur domestic manufacturing at a time when India's economy is growing at the slowest pace in a decade. Industrial output has fallen 0.1 per cent in the first nine months of 2013/14 fiscal year, and annual car sales declined by about 5 per cent in 2013.

Vijay Mantri, chief executive of Pramerica Asset Managers said the interim budget is positive for the auto industry given the long awaited excise duty cuts, but it also depends on whether the next government will continue this or not.

The BSE Auto index closed 0.8 per cent higher, outperforming the broader Sensex, which closed up 0.5 per cent. (Track auto stocks)

The finance minister also cut duty on consumer durables from 12 per cent to 10 per cent. He also announced that the excise duties on mobile handsets will be restructured to six per cent for all categories.

"To encourage domestic production of mobile handsets (which has declined) and reduce the dependence on imports (which have increased), I propose to restructure the excise duties for all categories of mobile handsets," Mr Chidambaram said.

Radhika Rao of DBS, however, said that the cut in the excise duties will have a bearing on the indirect tax takeaways, putting revenue targets at risk.

(With inputs from Reuters)