Those planning to buy a BMW 7 series, an Audi A8, a Bentley or Lamborghini could save lakhs of rupees by waiting for a few months. That is because the Government is all set to announce a reduction of basic import duty by half on such luxury cars imported from Europe at the India-EU summit scheduled to be held on February 10.
At present, imported new luxury cars (with engine capacity of over 1,500 cc) attract over 100 per cent duty. It includes basic import duty of 60 per cent, besides countervailing duty or CVD (imposed in lieu of excise duty on same product produced in India), special additional duty and education cess. Now, the plan is to cut the basic duty to 30 per cent.
A senior Government official said, “Duty cut is required to protect the export interests of domestic car manufacturers in Europe.” Car companies, such as Hyundai, Renault and Maruti Suzuki, export over 2.5 lakh vehicles every year to Europe. “There is apprehension that if we do not reduce the duty on imported cars, then, our cars may face some tariff barriers,” he added.
The Government has indicated that there will not be a blanket tax relief. “There could be a limit on the number of cars to be imported, or cars with certain specified engine capacity and length only could get the benefit,” he added. In such a situation, the proposed lower duty will only apply to luxury or high-end cars.
Indian manufacturers are quite apprehensive about such a move, as it feels that duty reduction will hurt its sales and growth plans. But Government officials believe that the Indian industry's strength lies in small and mid-size cars and hence there is no threat from European companies.
Indian automotive manufacturers do not buy the Government's explanation. Director-General of the Society of Indian Automobile Manufacturers (SIAM), says, “Even if (EU) puts duty on Indian cars, it would be around 5-6 per cent, which is the normal rate in Europe.” He added that Europe is shrinking as a market, while India is growing.
Partner (Indirect Taxes) with Ernst and Young, said, “If the Government decides to reduce the customs duty, it has to consider the possible adverse impact of import of cars on the domestic industry.”