In a bid to provide a fillip to the manufacturing sector, the government today reduced excise duty on cars and commercial vehicles and slashed it on a host of capital goods and consumer non-durables till June 30.
"In keeping with the conventions, I do not propose to make any announcements regarding changes to the tax laws. However, the current economic situation demands some interventions that cannot wait for the regular Budget," Finance Minister P Chidambaram said in the interim budget.
He restructured excise duties for all categories of mobile phone handsets to encourage domestic production and discourage imports. The rates will be 6 per cent with CENVAT credit or 1 per cent without CENVAT credit.
To stimulate growth in capital goods and consumer non-durables, the Finance Minister announced a reduction in excise duty to 10 per cent from 12 per cent on a range of goods till June 30.
In a bid to provide relief to the automobile industry, where sales have declined, the government lowered excise duty till June 30.
The new excise duty on small cars, motorcycles and scooters is 8 per cent as against 12 per cent earlier.
On SUVs, excise duty has been brought down to 24 per cent from 30 per cent. Excise duty on large cars will now be 24 per cent compared with 27 per cent earlier, while the duty on mid-sized cars will go down to 20 per cent from 24 per cent previously.
Manufacturing productivity has been low for the past few months and with the concessions for capital goods, auto and consumer durables, demand and therefore productivity is expected to increase, said Sachin Menon, Partner and National Head, Indirect Tax, at KPMG in India.