Interim Budget: ‘Much-needed relief given to capital goods, consumer durables and auto sector'

>Finance Minister P Chidambaram, in the Interim Budget for 2014-15 fiscal, has reduced the excise duty on small cars, scooters and mobile handsets.

The excise duty has been reduced from 12 per cent to 8 per cent for small cars and from 30 per cent to 24 per cent for SUVs.

Commenting on the Interim Budget,

Nihal Kothari, Executive Director, Khaitan & Co, said: “The much expected reduction in excise duty and service tax to revive the manufacturing and service sector growth has not found favour with the Finance Minister, as he has given high priority to containing fiscal deficit and providing subsidy to food and fertiliser sector in the election year.’’

He added that the Finance Minister “has announced reduction in excise duty in the case of three sectors facing deceleration in manufacturing growth. The excise duty on capital goods has been reduced from 12 per cent to 10 per cent, on mobile handsets to 6 per cent, and in the case of automobile having different duty rate, the reduction is by 2 per cent to 4 per cent.’’

According to Sachin Menon, National Head-Indirect Tax, KPMG , “The vote-on-account gave the much needed relief to the capital goods, consumer durables and auto sector at a time when the demand is low. This would spur demand in the interim, provided the benefit is passed on.’’

Stating that “manufacturing productivity was low for the past few months’’, Menon said with “the concessions for capital goods, auto and consumer durables, we hope to increase demand and therefore productivity.’’

Kothari added that the Customs duty has been reduced on non-edible oils to 7.5 per cent. Exemption of countervailing duty on machinery has also been announced.

Stating that these changes would come into effect immediately on issue of the notification and would continue till March 31, 2014, Kothari added that the above changes would give temporary relief to select sectors.

Daksha Bakshi, Executive Director, Khaitan & Company, added: “In the face of election, the FM was bringing to the attention of the nation the ‘growth’ and ‘development’ achieved by the UPA government, to negate the allegation of policy paralysis. An important statement was that the current account deficit needs to be contained through foreign currency inflows whether through FDI, FPI investments or through ECB, and that there is no case for doing anything to reduce these flows.’’

Bakshi added that some small measures were made to ease the immediate pressure on some of the ailing sectors of the economy, by reducing the excise duty.