Budget 2013-14 has been disappointing for the automobile industry and the announcements defy any logic. While the industry is happy with the fact that the diesel vehicle tax has not been announced, the excise duty increase on sports utility vehicles (SUVs) to 32% from 29% is unimaginable.
As an industry player, we are really concerned on the criteria on which cars are getting taxed. The government in its fine print has mentioned that the increase in excise duty is on SUVs with ground clearance of above 170 cm, with diesel engines 1.5 litres or more, are more than 4 metres long and have a seating capacity of less than 10 passengers.
The bulk of the SUVs in the market have a ground clearance higher than 170 cm. At Mahindra & Mahindra (M&M), we have taken pride in having SUVs with high-ground clearance and now we have to pay a price for it.
Moreover, we hoped to see the subsidy on electric vehicles extended by the government. The subsidy expired last year and it is unfortunate there has been no announcement on it from the government.
Meanwhile, the fresh focus on the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is welcome and would help the commercial vehicle industry that has been suffering right now. There would not be an immediate impact on the CV industry, but the demand of 10,000 buses under the JNNURM scheme would definitely bring in some cheer to the makers. The cut in excise duty on chassis by one percentage point from 14% to 13% too will be a boon to them.
Overall, the Budget looks promising. Though it is not a populist Budget, the finance minister has not announced anything that is throwing money away, which is good news. The FM has made it very clear in his speech that growth is the top priority for the government. The government?s take on infrastructure revives optimism in the market.
There has been a negative reaction to the Budget with the stock market giving it a thumbs down. However, it could be a short-term reaction and can even be seen as an overreaction. The fact that the government could constrain the fiscal deficit and bring it down to 5.2% is credible and lowering the target to 4.8% for FY14 is surely optimistic.
The surcharge of 10% on persons whose taxable income exceeds R1 crore, too, is reasonable. Indeed, it has never happened before that the finance minister has announced a measure and said that it is limited to a year?s time.
The surcharge increase to 10% from 5% on domestic companies whose taxable income exceeds R10 crore is a concern as next year corporates would be paying 2% for corporate social responsibility in addition to this.