Leading honchos of the domestic automobile industry on Tuesday met senior officials of the finance ministry seeking clarification on the new definition of "completely knocked down" vehicles as proposed in the union budget 2011-12 that threatens to disrupt production of high-end cars in the country.
The government has reportedly told the industry representatives that it would review the definition, insisting that the change was not unintentional but that the extent of its implications had been misjudged.
The meeting included a clutch of industry representatives from BMW, Volkwagen, Tata Motors, Hyundai and industry body SIAM, while revenue secretary Sunil Mitra represented the government.
"We explained our interpretation and the difficulty arising out of it," said Vishnu Mathur, director general, Society of Indian Automobile Manufacturers (SIAM).
Presenting this year's budget, finance minister Pranab Mukherjee had redefined the meaning of completely knocked down (CKD) units to exclude all vehicles that have pre-assembled engines, transmission, gearbox or chassis. This encourages local production of automobiles, but significantly increases the cost for high-end players and hits the launch of new products.
A vehicle assembled through the CKD route attracts a lower import duty of 10% against a vehicle imported as a completely built unit where the duty is 60%.