Car buyers would have to shell out more for their choice of vehicles, as Finance Minister Pranab Mukherjee proposed to raise the excise duty on small and large vehicles to its highest level in nearly four years, while also refraining from laying additional tax on diesel-driven vehicles.
Prices of all cars (compacts and sedans), utility vehicles (sports, multi-utlity and vans), commercial vehicles and two-wheeler is slated to rise by a minimum two per cent. The central excise duty has been enhanced by two percentage points to 12 per cent to 10 per cent.
In addition, there has been a two-way increase in excise duty on large cars. In keeping with the increase proposed in the standard rate the duty on such cars have been increased to 24 per cent from 22 per cent.
Presently, petrol cars longer than four meters having engine capacity above 1,200-cc and diesel cars longer than four meters with an engine capacity above 1,500-cc attract excise duty at the rate of 22 per cent, plus Rs 15,000.
Further, those vehicles, which attracted a tax of 22 per cent plus Rs 15,000, will now be subject to switching over to an ad valorem rate of 27 per cent, according to the finance minister's proposal.
The excise duty on all compact cars (as defined by the government) and two-wheelers was brought down to eight per cent from 12 per cent and to 20 per cent from 24 per cent on large cars in the first stimulus package of December 2008.
Further, fully imported large cars, SUVs and MUVs having engine capacity above the specified capacity with value exceeding $40,000 (about Rs 19.60 lakh) will now attract a custom duty of 75 per cent as against the current 60 per cent.
As a result car and SUV making companies like Maruti Suzuki, Hyundai, General Motors, Honda, among several others are taking a price hike across all their models. Commercial vehicle and two-wheeler makers like Hero MotoCorp, Bajaj Auto, Honda Motorcycle are evaluating an increase.
Though the exact quantum of increase is yet to be finalised by most manufacturers experts say that it could range between Rs 3,000-Rs 35,000 for cars and SUVs while that for two-wheelers the hike would mean an increase in the range of Rs 800-2,000. Commercial vehicle could pass an increase of Rs 15,000-35,000.
Pawan Goenka, president (automotive and farm equipment sectors) Mahindra & Mahindra said to a television channel, "The hike in duty will surely impact demand but it will wear off with time".
Imported cars whose price is double in India compared to the selling price in their home market will see a further hike by at least 15 percentage points. Price of models of Aston Martin, Lamborghini, Jaguar, Porsche, Bentley and Rolls Royce will go up as a result.
Meanwhile, to provide a competitive edge to home grown bicycle makers, the FM increased the customs duty on it to 30 per cent from 10 per cent and on bicycle parts from 10 per cent to 20 per cent.
Also, commercial vehicle bodies, on which specific rate of Rs 10,000 on chassis and applicable ad valorem duty is charged will now see a uniform rate of three per cent.
Specified parts required for the manufacture of hybrid vehicles enjoy full exemption from basic customs duty and special CVD with concessional excise duty/ CVD of six 6 per cent This concession is being extended to specified additional items and lithium ion batteries imported for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers.
