Government to Not Decrease New Duty on CKD Units

The new tax duty charged on cars that are assembled as CKD units have caused many people to ask the government to review their duty structure. According to recent reports, however, the requests proved a futile attempt, as the government recently rejected a fresh request for reconsidering their duty structure. The demand was first raised by the EU, which was later requested by Angel Merkel, German Chancellor, as well, during her visit to India.

According to recent reports, however, government officials said the ministry of finance conveyed clearly to the EU and other ministries that are lobbying against the new structure that as of now, there is no chance of them evaluating the duty. An official said that they are after all trying to close a loophole, which has caused the government to lose a lot of crore rupees. As a result of which there will be no review.

The government had earlier increased duty on CKD units assembled in this market, to 60% that it later reduced to 30%. The tariff before budget was 10%. In an aside, officials also said that the government is not likely to go for an immediate cut in tariff, in the recent free trade pact negotiations, going on with the government.

Currently the import duty on cars fully manufactured in India is 60% that increases to 110% following VAT, CVD and other taxes. SIAM, the auto industry put forward a stong proposal to the ministry of commerce opposing the move to remove imported cars from their negative list. This stand was reportedly taken as the Auto Mission Plan aims to develop new jobs in this industry and bring in latest technology and higher investments.

Lowering duty and softening its stand would have an impact the AMP’s objectives, including transfer of technology. Thought the decision of the government will come as a relief to home grown manufacturers, this issue has created a rift within the industry.

The auto head of Mahindra & Mahindra, Pawan Goenka, who also heads the SIAM, opposed a cut on imported car duties, while other global premium car makers like BMW, Mercedes and Audi want reduced tariffs. Meanwhile, home grown manufacturers and those who are based here were against lowering tariff, with the argument that cheap shipments in India would prove a disincentive for those who manufacture locally, which you not create new jobs.

The government also has the same view. The document by the AMP states clearly the proposed EU-India Free Trade Agreement as well as those with others like South Korea, Japan, where there would be protection available. AMP has also listed 77 items which are to be added to their negative list, including products like many auto parts and engines. These items are reportedly excluded from any reduction in tariff commitments that India is likely to make.

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