Sub Rs-10 lakh SUVs may be spared excise duty price hike

Some relief in sight if you were planning on buying an SUV that costs less than Rs. 10 lakh. The Finance Ministry is apparently reconsidering the hike in excise duty on SUVs below Rs. 10 lakh only after a request by the auto industry.

mahindra scorpio action shot

This is good news if you are planning to buy an SUV like the Mahindra Bolero, Mahindra Scorpio (mid-variants), Renault Duster petrol, Tata Safari, Tata Sumo, Chevrolet Tavera etc. Or even if you were looking at buying a sedan under Rs. 10 lakhs, you will be spared the price hike. In the Union Budget, Finance Minister Chidambaram had proposed a 3% hike in excise duty from 27% to 30% on “SUVs” (which the government defines as any vehicle that is over 4-metres in length, has an engine over 1500 cc and ground clearance of over 170 mm). Also read: Budget Impact 2013: SUVs to face higher excise duty

This move comes after the auto industry and Ministry of Heavy Industries requested the Finance Ministry to roll back the hike in excise duty on the sub Rs. 10 lakh vehicles. However, the Finance Ministry has said that it won’t roll back the tax, but it has asked the auto industry to figure out a way to separate SUVs that middle class buys from premium models.

The Ministry of Heavy Industries came up with the suggestion to keep a price cut off of Rs. 10 lakh, where SUVs above that get taxed higher, while there won’t be any change in excise duty on vehicles below that. It has also come up with a “height requirement” to separate SUVs from sedans, as the current government definition includes both sedans and SUVs. Also read: Hot-selling cars and SUVs of 2012

The proposal has not yet been accepted by the Finance Ministry as it fears that some carmakers may reduce prices of their vehicles to below Rs. 10 lakh, but make it up by selling higher volumes (something that would delight automakers and buyers alike).

The SUV market in India is the only one which has grown hugely in the last year (at 56% growth to 4.51 lakh vehicles), while the sedan market has fallen by 2% over the past year to 15.56 lakh vehicles. If this concession from the Finance Ministry comes through, carmakers like Mahindra, Renault and Ford can breathe easy. Also read: Budget impact: Some BMWs and Audis spared hike

The upcoming Ford EcoSport anyway still manages to qualify as a small car – and will be taxed at only 12% excise duty.

Source: Indian Express