Auto Assemblers - Budgetary Steps

Auto Assemblers - Budgetary Steps


WHT increase on car registration

The rates of advance tax, collected at the time of renewal of registration of private motor cars, are proposed to be rationalized by making about 30% to 40% increase in WHT rates.

Increase in duty rates on 1800cc cars or above

Increase in duty rates on import of cars/jeeps above 1800cc from 90% to 100%. Fixed duty/tax rates on old and used cars/jeeps increased by 10%.

Imposition of 5% FED on imported and locally manufactured car of 850cc

To generate revenue from well to do people, FED @ 5% has been levied on import as well as locally manufactured cars having engine capacity exceeding 850cc.

Tariff based system

Tariff based system of the auto industry is being improved further. The new tariff lines will continue to attract additional duty at the rate of 15% as the respective items are being manufactured locally.

CNG Buses

In order to encourage import of dedicated CNG buses, 15% customs duty on their import will be abolished.

Impact - Neutral to Negative

• We feel that overall Budget FY09 would bode negatively for the auto sector. Steps such as increase in withholding tax at the time of renewal of car registration, imposition of 5% FED onn imported and locally manufactured cars of 850cc and the rationalisation of tariff based system would increase the input costs of local auto assemblers.

• Luxury vehicles account for approximately 25% of imported units. The government’s decision to increase duty rates on 1800cc cars should help divert a major portion of their demand towards locally assembled cars in the luxury segment thus boding favourably for the domestic auto assemblers.FEDERAL BUDGET 2008-09