The excise duty on cars, SUVs and two-wheelers as well as consumer durables and capital goods was cut in the Interim Budget in February to help tide over a demand slump. (Agencies)
The concessions, which brought down prices of vehicles and consumer durables, were valid till June 30.
"Considering the present situation in various sectors, the government today has decided to extend the facility of this reduced excise duty to all those sections for a further period of six months, i.e., they will continue till December 31, 2014," Finance Minister Arun Jaitley told reporters here.
He said the government expects the industry to show positive results in the coming months and hoped "the benefit of these duty concessions will be passed on to the consumers at large".
Most carmakers and consumer durable firms had already passed on the benefit to customers by cutting prices.
The Finance Ministry said the government extended the duty concession "given its commitment to revive economic growth" and to provide a fillip to the capital goods and automobile sector.
Companies across the two sectors, including Maruti Suzuki, Honda Cars India, General Motors, LG India, Godrej Appliances and Whirlpool, felt the government's move gives a much-needed stimulus to the industry as it leads up to the festive season.
Excise duty on small cars, scooters, motorcycles and commercial vehicles will continue at 8 percent from 12 percent previously and on SUVs it stands at the reduced rate of 24 percent as against 30 percent.
The duty on large cars will continue at 24 percent compared with 27 percent earlier, while the duty on mid-sized cars will stand at 20 percent from 24 percent.
Excise duty on capital goods and consumer durables will continue at 10 percent as against the pre-budget rate of 12 percent.
The Ministry said even after the duty cuts, auto sales did not pick up during March and April, although there were some positive signs in sales in May. Sales of capital goods and consumer goods, too, continue to be sluggish, it added.
On the revenue loss due to the concessions, Jaitley said, "We expect it will benefit the economy. So if it benefits the economy, short-term loss of revenue should not be a concern.”
He said the decision on extending the concession, which would have expired in the next five days, could not have waited till the Budget, scheduled to be presented on July 10.
Ernst & Young partner Bipin Sapra said the government's move will help revive the beleaguered manufacturing sector.
Manufacturing output contracted 0.7 percent in 2013-14 against a 1.1 percent growth in 2012-13.
Both the auto and capital goods segments had been lobbying for the extension of the duty cut.
In the Interim Budget, then Finance Minister P Chidambaram reduced the duty with the aim of boosting the manufacturing sector, saying the "economic situation demands some interventions that cannot wait for the regular Budget".
He had said the rates could be reviewed at the time of the regular Budget.
Later on Wednesday evening, the government notified the extension of the excise duty cuts till December 31, 2014.
"In exercise of the powers conferred by ... of the Central Excise Act, 1944, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendment ...," it said.
The excise duty on cars, SUVs and two-wheelers as well as consumer durables and capital goods was cut in the Interim Budget in February to help tide over a demand slump.