Tata, Mahindra to pass tax cut to customers

Vehicle makers Tata Motors and Mahindra & Mahindra will pass on a 4 percent reduction in central value-added tax to customers, they said on Sunday.

The government announced an across-the-board cut in the ad valorem cenvat (central value added tax) rate on all products other than petroleum and products where the rate was already less than 4 percent.

Mahindra & Mahindra Ltd, maker of utility vehicles and tractors, would pass on the reduction across all its products, said Pawan Goenka, its president of automotive business.

"In fact for our high-end models we will try and see if we can do better than 4 percent," Goenka said on CNBC TV 18.

Earlier India's top vehicle maker Tata Motors Ltd said it would pass the excise reduction in central value-added tax on to its customers.

"Tata Motors will pass on to customers the benefit that will come in through the cut in cenvat. This is across products -- passenger and commercial vehicles," the company said in a statement. The details were still being worked out, it added.

Separately, top car maker Maruti Suzuki Ltd's chief said on television the reduction in cenvat would lead to a reduction in car prices by 4 percent.

"So far as I understand it, it will be applicable on all products, and it should be applicable to automobile manufacturers, too," Chairman R.C. Bhargava told CNBC TV18.

"It will be passed on to the customers."

India's automobile sector has been hit by the global and local liquidity crunch, rising interest rates and a slowing economy.

Maruti's November car sales fell 24.4 percent from a year ago, Tata's vehicle sales were down 30 percent, and Mahindra & Mahindra's fell 39 percent.