In a recent development, the Indian government has lowered the central consumption tax from 10% to 8%, according to reports from international sources. This adjustment has been welcomed by major automotive manufacturers such as Tata Motors and Ashok Leyland, who have announced plans to pass on the benefits to consumers. Ashok Leyland’s spokesperson stated that the revised tax rate will lead to an average price reduction of 1.6 rupees per vehicle, which is approximately $321. Meanwhile, Ravi Pisharody, vice president of commercial vehicle sales and marketing at Tata, mentioned that the company expects its product prices to drop by between 10,000 and 50,000 rupees following the tax cut. However, not all industry players are equally optimistic. Janeswar Sen, vice president of marketing at Honda Motors India, pointed out that the tax adjustment may not have a significant impact on hybrid vehicles, as these models are already priced higher and the discount margins are limited. He suggested that the government should also consider reducing high import tariffs on vehicles to further stimulate demand. This move comes as part of broader efforts to reform India’s taxation system and eliminate double taxation. The government had previously adjusted the consumption tax in late 2008, and the current 2 percentage point reduction is expected to cost the state around Rs 3,000 crore annually. Currently, excise duties on the Indian market remain below 4%, while the consumption tax for 1.2-liter passenger cars and 1.5-liter diesel vehicles stands at 8%. With this latest change, it remains to be seen how effectively the tax relief will translate into lower prices for consumers across different vehicle segments.

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