India to halt tax breaks for carmakers

NEW DELHI, Dec 30 (Reuters): India will not extend tax breaks to automakers beyond Dec. 31, a senior government official told the news agency, as the government looks to shore up its stretched finances before the end of the financial year despite the potential impact on car sales.

The decision comes at a time when weak tax receipts in a sluggish economy are making it difficult for India to meet its ambitious fiscal deficit target of 4.1 per cent of gross domestic product for the year to Mar. 31, 2015.

A tax break was first granted in February to revive sluggish car sales and later extended until the end of the year. Automakers had been hoping the concession, amounting to 3-6 per cent of the price of a car before the imposition of all duties, to continue in the new year.

"Duty concessions will lapse. We are not extending it," the official, who has direct knowledge of the matter, told the news agency. He declined to be identified because the information had not yet been made public.

India's car sales, which rose 3.8 per cent in the eight months from April 1 against the same period last year, are set to miss an earlier growth target of 5-10 per cent for fiscal 2015 set by the Society of Indian Automobile Manufacturers.