No sharp cut expected in customs duty on imported cars

Monday 01 April 2013, 12:44 PM by

Top Indian car makers are keeping their fingers crossed with the upcoming Free Trade Agreement (FTA) to be signed between the government and the European Union (EU). As per reports, good times lie ahead for the domestic auto industry, since the Indian government may offer EU a customs duty of 50 to 60 per cent on imports of high end premium cars.

In contrast to the same, EU wants the basic customs duty levy on imported premium models to be cut down to 10 to 30 per cent in the yet-to-be signed FTA. At present, the cess levied on Completely Built Unit (CBU) models is 100 per cent in the country.

Expressing his views on the same, a senior official from finance ministry was quoted as saying, “The stated logic behind the duty hikes on imported high end motor vehicles and motorcycles may have been to garner additional revenue from the affluent class. However, the move is also intended to protect Indian manufacturers from the possible adverse impact of any FTA, encourage domestic production of these luxury vehicles as well as to generate employment locally.”

He further added, “The move (to hike duties) was also influenced by representations from domestic makers who had expressed apprehensions of duty concessions on these items in FTAs adversely impacting their plans to manufacture such vehicles. While taking the final decision, the finance minister took into account the views of all stakeholders.”

The top car makers and Praful Patel, the Minister for Heavy Industries, Government of India, are not happy with the clauses of upcoming FTA to be signed with the EU. There have been arguments in the past that any sharp cutback in custom taxes would lead to slow down in fresh investments and employment creation by the Indian automobile operators. Further, Anand Sharma, Commerce Minister, Government of India, has affirmed that the upcoming India – EU FTA would be finalised by mid-April 2014 at a high profile meeting in Brussels. Therefore, it’s going to be interesting to see the final outcome when the FTA is signed between India and the EU, on the imported car market.

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