New budget affected the structure of automobile sector

The highest revenue generator for the Indian government is the automobile sector. The government earns Rs.25 billion annually in revenue from vehicle sales.  But, the new budget had adverse effects on the automobile sector. There is a bad news for all those who are planning to buy a new bike or a new car. Customers will have to pay more due to an increase in excise duties and registration charges. The excise duty on four-wheelers has increased from 10% to 60% and on two-wheelers from 30% to 40%.The road development and maintenance tax has also increased; ultimately increasing the cash outflow of the customers. The road maintenance tax, for four-wheelers, will be charged at 5% rate of the total cost of the vehicle, which initially was 2%. Likewise, two-wheelers will be charged Rs 6,000 annually.  The middle income groups are the ones who will be adversely affected by this steep increase in taxes, as they are the largest buyers of two-wheelers in the country. The automobile dealers have estimated the price of two-wheelers to increase by Rs. 15,000 to Rs. 17,000 which is a substantial amount while considering the middle-income group people. But the story doesn’t end there; the government has also increased the annual registration charges.   Now, all the four-wheelers fitted with 2000 cc engines and below will have to pay Rs. 16,500, up from Rs. 15,000. The vehicles which are fitted with 2001cc to 2900cc will have to pay Rs. 29,000, up from Rs. 25,000 and those with 2900cc will have to pay Rs. 44,000, up from Rs. 40,000. The two-wheelers fitted with 125cc engines and below will have to pay registration charge of Rs. 2,000, up from Rs. 1880; those with 126 cc to 250 cc engines will have to pay Rs. 3,500, up from Rs. 2,500 and those with 250 cc engines and above will have to pay Rs. 5,000.  As the excise duty has increased, the price of two-wheelers and four-wheelers has is bound toalso increased, . tThus making it difficult for the middle class people to buy a two-wheeler or even desire to shift to a four-wheeler. The iIndustry experts think that this is going to adversely affect the sale of both, two-wheelers and four-wheelers in the Indian market. This decline in sales is ultimately going to hit the government tax revenue. Today with the entry of the big automotive giants into the Indian automobile market, this budget comes as more of a disappointment of what was expected to change industry dynamics and set the wheels of the Indian economy moving towards prosperity again.