Luxury car makers weighing options on budget duty proposals

Though the auto industry is a high revenue generator for the government, going by the recent policy decisions, the sector's importance to the exchequer seems to have been largely overlooked.

For example, following a lot of deliberations, the government brought in a new slab in the budget, under which certain completely knocked down (CKD) kit imports would be charged tax at 30 per cent. However, the proposals of this year's budget call for a 60 per cent tax.

Any kit, comprising pre-assembled engines or gearboxes for either cars or two-wheelers, would be subject to this hefty levy which includes nearly all CKD imports since engines and gearboxes are typically the last products to be localised.

Without a doubt, the new duty would hit the assembly operations of luxury car makers such as BMW and Audi and also bike makers such as Harley Davidson.

Though earlier, senior official of Audi were quoted as saying they would review business in India if the CKD levy were to continue, spokespersons for both BMW and Audi in India have not come out on the CKD duty issue.

The adverse impact of the duty would not only be limited to luxury car makers, other vehicle makers would also be hit in their respective CKD operations.