Recently, Finance minister Arun Jaitley presented Budget 2018 which has proved to be a disappointment for the automobile sector. Finance minister increased customs duty on imports of luxury cars and bikes.

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A lot was expected from Budget 2018, but automotive industries have faced heat by this decision of Indian government. Luxury car and bike makers were looking at lowering of GST rates on its bikes and cars. However, it was not even tabled and that was a real disappointment. Not all the luxury vehicles are fully made in India instead use kits that are manufactured outside India and are finally assembled in India.

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Let us discuss few points and see how it will affect luxury vehicle sector and which ones in particular:

1. Increase in custom duty of accessories, auto parts, CBU and CKD kit:

All those vehicles which are imported into India through kits are all set to be costlier because custom duty on CKD models has been raised from 10 to 15 percent. Fully imported cars and bikes like Mercedes and Hayabusa which comes to the country via CBU route will now pay an import duty of 25 percent which used to be 20% earlier. The Indian government has raised custom duties on accessories and special parts of cars and bikes from 7.5% to 15 percent.

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2. Quotes shared by owners of two renowned companies:

Ronald Folger, Mercedes Benz CEO, said, “Sudden increase in custom duty of automobile sector comes as a great surprise and is actually unfortunate. This will certainly affect the growth and retail sector of luxury cars and luxury bikes.

Rahil Ansari, Audi’s head, said, Union budget 2018 is against the spirit of partnership and is a real disappointment. Introduction of welfare surcharge will definitely affect the prices and will further confusion customer.

3. Affect of fuel price:

Fuel has actually become costly. Although 2 rupees were deducted from basic and 6 rupees from additional excise duty were removed, which makes 8 rupees cheaper. On the other hand infrastructure and road cess of 8 rupees has been added, so, this leads us nowhere and we are back at the same point from where we have started. Education cess which was 3 percent has now become a health and education cess of 4 percent and this will further increase the cost.