The Indian auto market is facing some tough times at the moment with the ever increasing prices of conventional fuels, high auto finance interest rates and slow market sentiments. The entire auto industry was expecting a growth friendly 2013-14 Union Budget, but the reactions have been mostly mixed. P. Chidambaram, Finance Minister (FM), Government of India, has framed the budget with some both interesting and breakthrough decisions this year.
Prior to the 2013-14 Union Budget, the entire passenger vehicle sector was expecting a cut in the excise duty on Sports Utility Vehicles (SUV). However, the government has increased the excise duty from 27 per cent to 30 per cent, to be levied on SUVs with an engine displacement in excess of 1,500 cc. The news comes as a shock to Indian consumers and utility vehicle makers, because the segment has been one of the strongest performers lately in the domestic car market, even during the 2012 slowdown.
Chidambaram has decided to continue the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), which aims at improving the commercial transport infrastructure of the Indian urban cities. The FM has also increased the funds allocated to JNNURM scheme by more than 100 per cent, which will be utilised for the purchase of up to 10,000 buses. As per reports, the buses and trucks segment has plunged by an eye-popping 40 per cent rate in January '13 in the country.
Coming to the direct tax front, the 2013-14 Union Budget's 15 per cent investment allowance is being considered a welcome move for investments in new plants and machinery, in excess of Rs. 100 crore. However, the hike in surcharge on income tax from 5 to 10 per cent in case of corporate having taxable income over Rs. 10 crore could raise few eye brows. Further, on the indirect tax front, this year's Union Budget is slightly on the negative side. The customs duty on luxury cars has been increased from 75 per cent to 100 per cent and from 60 to 75 per cent in case of bikes with engine displacement of 800 cc or more.