The Narendra Modi government is likely to roll back the sops provided to the automobile industry in the Interim Budget early this year.
Senior officials told The Indian Express that the excise duty relief to small cars, large and mid-segment cars and SUVs will be withdrawn and restored to pre-Interim Budget level.
In the interim Budget, the UPA-II had reduced excise duty on small cars to 8 per cent, SUVs to 24 per cent, large and mid-segment cars to 24 per cent and 20 per cent respectively till June 30 .
“The exchequer is losing over Rs 700 crore per month on account of the excise relief to the auto sector while the sector has improved as per the November figures. It is in this context that the ministry is considering not extending the benefit,” the official said.
After the withdrawal of sops, the small cars, motor cycles and scooters will be taxed at the earlier rate of 12 per cent, sports utility vehicles will be taxed at 30 per cent while large and mid-segment cars will have to pay excise duty of 27 per cent and 24 per cent respectively, with an aim to shore up the dwindling kitty of the government. The domestic passenger car sales improved 9.52 per cent in November after contracting in October, by 2.55 per cent, according to the Society of Indian Automobile Manufacturers (SIAM) data.
The tax collection from excise duty contracted 0.2 per cent during the April-November period. The growth in the excise duty is against the asking rate of 21.8 per cent as per the Budget 2014-15. The mid-year review has already pegged the estimated shortfall in revenue collection at Rs 1,05,000 crore.
Concerned over the moderation in revenue mop up from the indirect taxes, finance minister Arun Jaitley had met top officials from the Central Board of Excise and Customs (CBEC) last month to assess the situation and work out strategies to meet the budgetary target.