Tuesday, 30 April 2013

Honda to pay Rs 164 Crore more as excise duty for selling cars on Discount

Honda Cars India Limited has been trying to capture market share of the Indian market by selling the models like Brio, Jazz on huge discounts. The Central Board of Excise & Customs(CBEC) has served a showcase notice to Honda Cars India Limited and has asked for payment of INR 164 Crore of excise duty. As per the guidelines, the excise duty to be paid on cars should be calculated on actual production cost plus marginal profit and not on the discounted sales price of the car.

This follows the Supreme Court judgement in the Fiat case last year, where the apex court ruled that if a company sells products at a loss for a long period because of commercial considerations or under competitive pressures, then price is not the sole consideration and excise duty should be paid on manufacturing cost plus a 'reasonable' profit margin. Excise duty is an inland tax on the sale of goods produced domestically. It is paid by the manufacturer, but often passed on to the customer.

In the tough times, when Indian passenger car market grew by just 2.2% thanks to huge SUV sales, however the passenger car sales declined, the carmakers retort to huge discounts to push up the sales. Moreover the lack of diesel engine from Honda's stable proved to be a sore point for Honda India and the market share dropped to 2.07% in 2011-12 from 4.05% in 2007-08.


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