New Delhi, Mar 22: The government today halved the proposed customs duty on completely knocked down (CKD) kits containing pre-assembled engines and gear boxes of automobiles to 30 per cent, even as the automobile companies continued to seek clarity on the definition of CKD.
Replying to debate on the Finance Bill in Parliament, Finance Minister Pranab Mukherjee proposed to "reduce the basic customs duty from 60 per cent to 30 per cent on CKD kits containing pre-assembled engine, gearbox transmission assembly imported for the manufacture of vehicles".
Earlier last month while presenting the Budget for 2011-12, Mukherjee had redefined the meaning of completely knocked down (CKD) units, ostensibly to encourage local production of automobiles, which may alter the rate of customs duty on different imported parts.
"A definition for 'CKD unit' of a vehicle, including two-wheelers, eligible for concessional import duty is being inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or chassis where any of such parts or sub-assemblies is installed," the Budget document read.
Industry players that PTI contacted, including officials of Society of Automobile Manufacturers (SIAM), declined to offer comments on the latest development saying they would need to read the finer details.
However, earlier this month SIAM had said the new definition for CKD units of vehicles introduced in the Budget for 2011-12 would significantly increase the cost for high-end players and also hamper the introduction of new products.
Stating there is a lack of clarity on the issue, SIAM Director-General Vishnu Mathur had said: "The way we read the English language, (as per the new CKD definition) we have to assemble engines, transmission and gear boxes locally. This is commercially unviable for very low volume products."
For the high-end segment, this will not only "significantly increase the cost", but it will also become "difficult for them to introduce new products", he added.
Currently, luxury segment players including BMW, Mercedes Benz and Audi rely heavily on the imported CKD route to sell their products in India.
CKD units attract a basic customs duty of 10 per cent, over and above other levies of about 30 per cent, which takes the total duty to about 40 per cent. PTI
