India Increases Customs Duties on Luxury Items

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Apr. 3 – The Indian government has made some key changes in its 2013 Budget that will primarily affect the super-rich, with customs duties on imported luxury items, including high-end motor vehicles, motorcycles, yachts and other similar vehicles, being increased. A further 10 percent surcharge, in addition to normal tax rates, has also been applied to people earning more than Rs. 10 million a year. This surcharge will affect approximately 42,800 people in India.

The duty hike will increase rates for motorcycles with a 800cc engine capacity or higher from 60 percent to 75 percent. The duty on yachts and similar vessels has been increased from 10 percent to 25 percent. Motor vehicles will see a 70 percent to 100 percent increase. Sports Utility Vehicles (SUVs) have been given an additional 3 percent levy.

The Indian Express reported that cars across the country would essentially become costlier by Rs. 35,000 to over Rs. 1 lakh. This news came as a disappointment to the automobile industry in India.

“With duty hikes, all manufacturers will pass on the burden to consumers and this will further dampen the ongoing sluggish sales,” said Sandeep Singh, Deputy Managing Director and COO of Toyota Kirloskar Motor (TKM).

Mr Singh also added that jobs will be at risk if sales drastically fall as a result of the duty hikes.

Joginder Singh, President and Managing Director of Ford India, expressed a similar response.

“The automobile industry is a significant contributor to India’s economy and future growth potential. We are disappointed that there is very little in the Budget that will help boost consumer confidence and revive growth. It is a missed opportunity to introduce measures that would have revived industrial growth significantly. As we all know, the automotive industry has been going through very challenging times. We are disappointed with the hike in the excise duty on SUVs,” he said.

The tax hike and surcharge may come as a disappointment, but the government has made an effort to levy additional taxes on those able to afford it rather than increasing the tax rates for everyone throughout the country.

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