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Increase In Export Duty For Exported Cars

The UK has enjoyed increased car exports into India during 2012 where there is a growing middle class with an appetite for luxury brands such as those from the UK. At the same time however, the Indian economy has slowed and the government is now trying to raise additional taxes while curbing imports in an effort to stimulate local industry.

The UK has enjoyed increased car exports into India during 2012 where there is a growing middle class with an appetite for luxury brands such as those from the UK. At the same time however, the Indian economy has slowed and the government is now trying to raise additional taxes while curbing imports in an effort to stimulate local industry. This has led to a proposal to raise customs duty on imported cars and motorcycles while increasing excise duty on sports utility vehicles (SUVs). Commenting on the proposals, Finance Minister Mr Chidambaram said: "There is an affluent class in India that consumes imported luxury goods such as high-end motor vehicles, motorcycles, yachts and similar vessels. I am sure they will not mind paying a little more." In his budget speech on Thursday February 28, he continued: "I propose to increase duty on such motor vehicles from 75% to 100%; on motorcycles with engine capacity of 800cc or more from 60% to 75%."

 
A written explanation of the Finance Bill explains that customs duty on imported cars worth more than $40,000 or with a petrol engine bigger than 3 litres or diesel greater than 2.5 litres, will be increased to 100%. The bill also raised the tax on domestic SUVs from 27% to 30%. The move angered many motor industry companies, with Audi India's Michael Perschke commenting: "Increase in customs duty for imported cars and excise duty on SUVs is very surprising. It will severely impact the auto industry and its growth. We will have to seriously evaluate the impact of this hike on our prices and have no choice other than to pass on any increase to the customer."
 
Other car industry spokesmen condemned the tax hike on SUVs with GM's President and Managing Director in India claiming: "We were expecting the roll-back of the excise duty imposed last year. Instead, there is an increase of 3 percent excise duty on SUVs and there is also a hike of 25 percent in customs duty on high-end imported vehicles. These hikes are not on the expected lines and will impact the sale of SUVs." Automotive parts suppliers also disapproved, with the Chief Executive of India's National Bearing Company, Rohit Saboo, saying: "There has been no support from the government in the auto segment. Instead, there is an increase in the excise of the SUV which was the only sector in the auto space doing well." 
 
With British car exports to India and China so important to the UK industry's growth, they will be keeping a close eye on the situation for any further protectionist measures should these economies slow further.

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