Commercial vehicles that are full imports, brought into India as completely built units (CBUs) are set to become costlier with Union Finance Minister Nirmala Sitharaman proposing to raise customs duty on them. All CBU commercial vehicles will become expensive as customs duty has been raised to 40 per cent, from the current 25 per cent with effect from April 1, 2020. The decision by the government seems to have been taken keeping in mind auto industry body Society of Indian Automotive Manufacturers' (SIAM) suggestion to increase customs duty on imported commercial vehicles.
"The increase in customs duty for CKDs (completely knocked down) and SKDs (semi-knocked down) of electric vehicles and CBUs of commercial vehicles are positive steps for Make in India," said Rajan Wadhera, President, SIAM.
Wadhera however maintained that SIAM is disappointed ince the Union Budget speech was not as expected to provide some direct benefits to the Indian automotive sector, which has been reeling under an unprecedented slowdown.
"The Indian automobile industry was looking forward to some direct benefits in the budget, which could have helped in reviving demand in the context of the current slowdown and huge investments made by the industry for transition to BS6 and from that aspect, the Budget speech was not what we were expecting," Wadhera added.
Observers say that increase in customs duties on CBU models will not help the Indian auto industry, and most commercial vehicles sold in India are either locally assembled, or manufactured in India.
"Increase in customs duties on CBUs will not have any significant impact on the auto industry as all CBU models are high-end models. The intent behind increasing customs duty seems to be to increase local assembly," said Subrata Ray, an analyst with investment information and credit rating agency ICRA told Carandbike.
Even the automotive dealers' association body, the Federation of Automobile Dealers Associations (FADA) said the Union Budget 2020 lacked immediate demand boosters for the Indian automotive industry. FADA President Ashish Harsharaj Kale expressed disappointment that no direct benefits for the automobile sector were announced in the Union Budget.
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