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Excise Duty Relief Ends Today; Cars to be Costlier from Jan 1, 2015

Snapshot: Popular models such as Maruti Suzuki Alto & Swift, along with Hyundai Elite i20 and Honda City would be pricier by Rs 50,000 to Rs 1 lakh.

The Narendra Modi-led NDA Government has decided not to extend the excise duty relief on cars and utility vehicles. As a subsequent result of this, cars would get costlier from January 1, 2015 and popular models such as Maruti Suzuki Alto & Swift, along with Hyundai Elite i20 and Honda City would be pricier by Rs 50,000 to Rs 1 lakh. Also, the luxury cars by Volkswagen, BMW, Mercedes-Benz and Audi, imported as CBU, would cost around Rs. 5 Lakh more.

A senior finance ministry official, on the condition of anonymity, said the government would allow interim relief, announced in February and extended once in June, to expire on December 31. In the consumer durables sector the excise was reduced to 10% from 12%. The government had announced the 4-6% cut in excise duty as an interim measure to help stir up demand against continuous low sales. The industry has seen a feeble recovery since the start of the fiscal year in April, though it was limited to just some top players. With no extension to relief, excise duty on cars up to 4 metres in length would go back to 12%, while that on big sedans and SUVs would return to 24% and 30%, respectively.

Several carmakers had already also announced price hike from January onwards blaming rising input costs. Maruti Suzuki, Hyundai, Nissan, Renault, Honda and a few others are expected to hike prices. Withdrawal of excise duty sops would make changes much steeper. "The hike in model prices is a company-specific decision. We are feeling the pinch of raw material prices and fluctuating forex rates, forcing us to increase prices from January," said Rakesh Srivastava, who heads marketing and sales at Hyundai Motor India. "Any change in excise would be industry-specific and lead to across-the-board hike." Other major carmakers are also toeing a similar line. "The hike would be substantial if excise duty concessions are withdrawn. It would impact the industry adversely and the moderate growth trend in the past few months may change," said RS Kalsi, executive director for marketing and sales at country's largest carmaker, Maruti Suzuki. Honda Cars India is planning to increase prices with a bigger margin.

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