In a relief to the automobile and consumer durable sectors, the government on Wednesday extended the excise duty concession by six months to December 31.
The government had cut excise duty on cars, SUVs and two-wheelers as well as consumer durables in the Interim Budget in February to help the industry tide over a demand slump.
The concessions were valid till June 30 and Finance Minister Arun Jaitley announced the extension till the year end.
"Considering the present situation in various sectors, the government today has decided to extend the facility of this reduced excise duty to all those sections for a further period of six months, i.e., they will continue till December 31, 2014," he told reporters here.
Excise duty on small cars, scooters, motorcycles and commercial vehicles will continue at 8 per cent from 12 per cent previously. The factory gate duty on SUVs stands at the reduced rate of 24 per cent as against 30 per cent.
The duty on large cars will continue at 24 per cent compared with 27 per cent earlier, while the duty on mid-sized cars will stand at 20 per cent from 24 per cent.
Excise duty on capital goods and consumer durables will continue to attract a lower duty of 10 per cent as against the pre-budget rate of 12 per cent.
Asked about the loss of revenue due to the extension of these concessions, Jaitley said the short-term loss will benefit the economy in the long run.
Jaitley said, "We expect it will benefit the economy. So if it benefits the economy, short-term loss of revenue" should not be a concern.
He said the decision on extending the concession, which is valid until June 30, could not have waited till the Budget, scheduled to be presented on July 10.
A notification in this regard will be issued today, Jaitley said.
Most carmakers had passed on the benefit of excise duty reduction to customers by cutting prices. The auto industry body had been lobbying for extension of the reduced rates.
"It will be good for the auto industry. The momentum that has been built in last few weeks will continue," Maruti Suzuki India Chief Operating Officer (Marketing and Sales) Mayank Pareek told PTI.
Car sales grew 3.08 per cent in May, snapping two successive months of declines, raising hopes the industry may be coming out of a prolonged market slump.
Automobile sales in India fell for the second consecutive year in 2013-14 and were 4.65 per cent lower at 17,86,899 units. In 2012-13, car sales fell 6.69 per cent, the first drop in a decade.
The Consumer Electronics and Appliances Manufacturers Association, too, had demanded extension of the duty cut.
In the Interim Budget, then Finance Minister P Chidambaram reduced the duty with the aim of boosting the manufacturing sector, saying the "economic situation demands some interventions that cannot wait for the regular Budget".
He had said the rates could be reviewed at the time of the regular Budget.