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Passenger Vehicles will feel further pinch as excise duty on SUVs shoots up to 30%
Passenger Vehicles: Budget 2013-14 Analysis
Budget Provisions
Excise duty on SUV increased to 30% from 27% earlier. SUVs occupy greater road and parking space and ought to bear a higher tax.
Import Duty on Imported Cars to Increase From 75% to 100%
Excise on Small Cars, Sedan remains unchanged. Also, no diesel car surcharge on hatch and sedan segment
DTC Implementation deferred.
Financial Year 2013-14 expenditure plan will be 30% higher than FY 2012-13 with total expenditure to be 5.5 Lakh Crores. Focus on Infrastructure and Road Projects
The development on the GST front. The finance minister indicated that there has been some consensus that has emerged on the issue and that it will get passed in the near future
No change in corporate tax rates.
Investment allowance of 15% for investments above Rs 100 Cr as a tax incentive.
Extension of tax concession on spare parts of eco-friendly cars.
Industry Expectation
With the need to grow at a much faster clip, the industry demanded excise duties of small cars to be brought to previous levels ie at levels of 10%. Small cars, which means petrol cars (upto 1200 cc) and diesel ones (up to 1500 cc), which are less than 4 metres long are taxed at excise slab of 12%.
In the case of bigger cars, the industry wants the distortion with smaller cars and the tax differentials to be narrowed, it wants duties to be reduced from 24%-27% to a uniform 22% irrespective of size of the vehicle and its engine displacement.
For vehicles which are used to ferry rural passengers and in ‘gramin seva’ vikrams - excise on such vehicles to be lowered – as of now, these vehicles have to pay the same excise as large cars and SUVs at 25 and 27% slabs.
Seeking an excise duty structure as stated in the auto policy and the 10-year Auto Mission Plan (AMP).
Asked for a concessional excise duty structure - an equivalent GST to be applicable at 10% flat across all segments such as cars
Concrete announcement regarding roll-out of GST
Rural focus of the budget and direct tax relief for the middle class
Offer tax-saving incentives in insurance beyond the current one lakh limit under section 80C and extend tax exemption limits for medical insurance. These measures would not only boost investment but also promote consumption through lower incidence of tax and consequently higher disposable income for the middle class.
Likely increase in import duty on steel
The government on one hand may raise income tax slabs for individual considering the election next year, but on other hand it may raise excise duty to deal with fiscal deficit.
There can be rise in excise duty across the board, which the government raised them from 10% to12% in the last budget
Imposing Diesel Tax on large diesel passenger vehicles. This will be negative for large diesel passenger vehicle producers.
Budget may impose additional duty on diesel cars and utility vehicles
Budget Impact
For those planning to own an SUV will have to cough up more as excise duty on these vehicles has been increased to 30% from 27% earlier. However, SUVs registered as taxis have been spared. Luxury vehicles will also cost more as import duty raised from 75 to 100% on luxury vehicles.
Models like Mahindra Scorpio, Renault Duster, Tata Safari Storme prices might increase by upto Rs. 30,000 and Luxury SUV like Fortuner, BMW X1, Audi Q3 might increase from Rs. 60,000 to Rs. 75,000.
Stock to watch
M&M, TTM, MUL, Toyota Kirloskar, Ford, Nissan
Outlook
High interest rates and rising fuel costs combined with sluggish economic growth in Asia's third-largest economy have slammed the brakes on India's car industry, once one of the world's most promising growth markets.
Car sales growth in India is set to be its poorest in almost a decade during the financial year that ends in March, but strong demand for sports utility vehicles (SUVs) had provided some cheer for the country's automakers.
The impact of the Union Budget 2013-14 on the passenger vehicle segment is negative.
The budget has nothing to say for the Industry in general. Excise on Small Cars, Sedan remains unchanged, thereby providing no needed impetus to the passenger car industry. Also, no diesel car surcharge on hatch and sedan segment.
Sales of utility vehicles with engine capacity of 1,500cc (mainly SUVs) and above are likely to be impacted. Since automakers are likely to pass on the hike to buyers, sales might be hit. The proposed hike may, however, slow the pace of sales growth of such vehicles.
Financial Year 2013-14 expenditure plan will be 30% higher than FY 2012-13 with total expenditure to be 5.5 Lakh Crores. Focus on Infrastructure and Road Projects in Rural India is one positive factor for the industry though.
