Did you dream to own a Merc or BMW, but was not able to as the cars were out of the budget? Not anymore. 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.
The Government of India is planning 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.
The domestic industry is 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.