Car, bike prices could be affected as custom duties on certain auto parts to be raised to 15%

Union Budget 2021 India: FM Nirmala Sitharaman proposed an increase in customs duty of various parts including ignition wiring sets, safety glass, and parts of signalling equipment to 15 percent with effect from 2 February.

By:Updated: Feb 01, 2021 5:03 PM
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Indian Union Budget 2021-22: Finance Minister Nirmala Sitharaman during her speech revealing details about the Budget for the upcoming financial year stated that the government will review 400 old exemptions in customs this year. Moreover, a new customs duty structure will be in place by October 2021. The new structure also includes revision of custom duty on certain auto parts to 15 percent. This could lead to an increase in the prices of vehicles across segments.

Sitharaman proposed an increase in customs duty of various parts including ignition wiring sets, safety glass, and parts of signalling equipment to 15 percent with effect from 2 February.

Currently, the parts attract customs duty in the range of 7.5-10 percent. The parts mentioned above are not critical parts for an automobile and are also available locally. This move is aimed to give local manufacturing a boost.

“We are raising custom duty on certain auto parts to 15 percent to bring them on par with a general rate of auto parts,” Finance Minister Nirmala Sitharaman said in her Budget Speech.

The government said the changes in basic customs duty is for creating a level-playing field for the benefit of micro, small and medium enterprises (MSMEs) and other domestic manufacturers.

Also read: 2021 Budget: Electric two-wheeler makers react, welcome extended tax holiday for startups

The parts would also attract agriculture infrastructure and development cess at the rate of 5 percent.

Automotive Component Manufacturers Association President Deepak Jain said, “Increase in basic customs duty on select auto components will encourage local manufacturing of such items.”

The Union Budget 2021-22 brought in some relief for startups and MSMEs as the government will allot Rs 15,700 crore for MSMEs in FY22 and startups will be able to avail of an extension of tax holiday by one more year. Additionally, minimum wages will now apply to all categories of workers and women will be allowed to work in all categories with adequate protection.

Meanwhile, a shortage of semiconductors continues to affect several car manufacturers globally. The usage of semiconductors has gone up in recent times as more and more cars today come with electronic features like Bluetooth-connectivity, navigation, or even hybrid-electric systems that require these silicon chips that cater to control and memory functions.

Major car manufacturers like Tata Motors, Toyota, Ford India, and others have stated that this shortage will continue to impact the industry with Honda Cars clarifying that this issue may lead to production-related disruptions in the coming days.

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