Published Editorial

Budget 2013: Duty hikes to impact luxury car segment

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Amit Bhagat
Associate Director
Tax and regulatory services

Finance Minister P Chidambaram's Budget for 2013-14 reflects an intent to tax the super-rich across multiple segments. 

That is also reflected in the key indirect tax changes proposed in the auto sector. The excise duty rates on SUVs (other than those registered as taxis) have been increased to 30 per cent from 27 per cent earlier.

Also, basic customs duty on import of cars belonging to the luxury segment has been increased to 100 per cent from 75 per cent earlier, while on motorcycles with engine capacity of 800cc or more to 75 per cent form 60 per cent earlier.

In order to promote eco-friendly vehicles - hybrid and electric cars - validity of the concessional excise and customs duty rates on parts of such cars has been extended till 31 March 2015. Also, basic customs duty has been exempted on import of the lithium ion automotive battery, which is used in the manufacturing of lithium ion battery packs supplied to the manufacturers of the eco-friendly vehicles.

On income tax front, although the tax rate for the corporate segment has been maintained, the surcharge has been increased from to 10 per cent from 5 per cent earlier.

The withholding tax applicable to non-resident taxpayers on royalty and fees for technical services earned from an Indian company has been proposed to be increased from an existing rate of 10 per cent to 25 per cent except certain specific cases.

To boost setting up of manufacturing facilities in India, an investment allowance of 15 per cent for taxpayers investing Rs. 100 crore or more on plant and machinery.

Overall, in the auto sector, the major impact would be on the industry players specifically catering to the luxury car segment.

(The views expressed here are personal.)