4.3. RECOMMENDATIONS ON TARIFF REFORM The Government does envisage the reduction of tariffs in the automotive sector in a five year time frame, as per an earlier ECC decision. But this process does not seem to go for enough with only minor reduction in tariffs in the terminal year from the present level and large inter- vehicle differentials will persist according to this scheme of up to 70 percent. Based on the above analysis, we make the following recommendations (see Table 4.3) for implementation in a medium-term setting v) The maximum tariff on vehicles should be brought down to 35 percent in a five year time frame. vi) The dispersion of tariffs among CBUs of vehicles should not exceed 15 percent in the terminal year with lower rates of 20-25 percent on trucks and buses and 35 percent on cars and motorcycles. vii) The same tariff rates should apply on cars of different sizes. However, in order to discourage luxury consumption, excise duty maybe applied both on CBU imports and domestic production. The rate of excise duty maybe levied at 20 percent on cars with capacity of cc, rising to 60 percent for cars above cc.
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TABLE 4.1: DUTY STRUCTURE ON AUTOMOTIVE SECTOR (DURING 2011-12) S. No. Category Duty Structure (%) SRO I Rate of Duty on CKD on Non-localised parts SRO I 1st Schedule of Customs Act 1969 (CBU) Rate of duty on raw Materials Rate of duty on sub- components Rate of duty on components Rate of duty on sub- assemblies SRO 656(I)/2006 Statutory Duty on localised
