Report – India to stop offering tax breaks to automakers image

According to a senior government official, India has opted to stop awarding tax breaks to carmakers beyond the current expiration date, set for December 31.

The country’s government has opted to cease the incentives because it needs to manage its limited financial resources before the end of the current fiscal year – even though the decision might negatively impact car sales. The tax break was introduced back in February and was designed to support the dwindling auto sales and the government later on extended the period to the end of the year. The concession, which slashed 3 to 6% of the price of a car before taking into account all duties, will be axed, said the official, who has direct knowledge of the government’s strategy but declined to be named because the decision has not been made public yet.

The auto executives say prices will need to be taken up by the same amount, but the impact on auto sales is not expected to be long-term, while rising production costs have already brought price hikes form carmakers such as General Motors, Nissan, Hyundai, BMW and Mahindra & Mahindra. The Society of Indian Automobile Manufacturers has previously said the growth level for fiscal year 2015 is of 5 to 10%, but since April 1 the eight-month period deliveries have increase only by 3.8% – leading to experts to consider the threshold as unobtainable throughout the rest of the period.