New Delhi, June 25 (IANS): The government Wednesday extended by another six months till December the cut in excise duty levied on the automobile industry.
"Extension of excise duty cut to reduce revenue in short term, but benefit economy in the long run," said Finance Minister Arun Jaitley while announcing the decision at a press briefing here.
The automobile industry has witnessed diminishing sales in passenger and commercial variants due to high fuel and interest costs coupled with an overall economic slowdown.
In the interim budget 2014-15, the government had reduced central excise duty on small cars, scooters/two-wheelers from 12 to 8 percent.
It had also reduced the duty from 30 percent to 24 percent on SUVs (sports utility vehicles), and medium segment sedans from 27-24 percent to 24-20 percent, respectively.
Backing the government's move, Chairman Emeritus of Tata Group Ratan Tata tweeted: "The nation voted for change. We need to stand together to support the new govt's actions to re-build economic growth and prosperity in India."
For a long time, the automotive industry had been demanding cut in excise duty to spur demand. The manufacturers have been increasing the vehicle prices due to hike in their input costs.
According to the Society of Indian Automobile Manufacturers (SIAM), car sales fell 4.65 percent during 2013-14 and stood at 1,786,899 units from an offtake of 1,874,055 units in the previous fiscal.
The announcement led to automobile manufacturers making healthy gains on the equity markets. The Bombay Stock Exchange's (BSE) automobile index gained 114.38 points or 0.76 percent in Wednesday's trade.
Major automobile gainers Wednesday at the 30-scrip sensitive index (Sensex) included Bajaj Auto, up 2.63 percent at Rs.2,279; Maruti Suzuki, up 2.56 percent at Rs.2,477.40; Hero MotoCorp, up 1.01 percent at Rs.2,640.05; Tata Motors, up 0.28 percent at Rs.443.40; and Mahindra and Mahindra, up 0.27 percent at Rs.1,170.40.