Additional tax on diesel cars unlikely

Indian carmakers are taking a unanimous stand against the government’s proposal to levy higher taxes on diesel-powered cars. The government is trying to check the increasing use of diesel, which is heavily subsidized. But carmakers are opposing the additional tax on diesel cars because they are already feeling the heat due to a slowdown in demand for cars. A higher tax on diesel will further hit them hard.


“All manufacturers were unanimously of the opinion that such a levy would further affect the industry, which has already been struggling with slow sales”, Vishnu Mathur, Director General, Society of Indian Autombiles (SIAM) was quoted as saying by the Business Standard. He mentioned that the Central Board of Excise and Customs (CBEC) had a consultation meeting with SIAM and top officials of carmakers such as Maruti Suzuki, Hyundai, Toyota, Mahindra and Ford regarding the imposition of additional taxes to address the rapid shift in demand in favor of diesel vehicles.  CBEC has asked industry executives to provide them information about the sales trends of diesel cars and their inventory position to better understand the market. Based on the data, CBEC will decide whether to increase excise duty on diesel cars or not.

During the 2011 fiscal year (April 2011 – March 2012), sales of diesel cars have increased by 35% while on the other hand, sales of petrol cars have decreased by 15% in the same period clearly revealing the dieselization of the Indian market. The auto industry is open to reducing the cost differential between petrol and diesel prices, which stand at about Rs. 30 per litre. But, the government may not hike diesel prices because it will directly affect costs of goods and public transportation leading to more inflation than now. So, there won’t be any changes in diesel prices. CarToq also learns that the proposal to increase tax on diesel cars is not likely to be passed anytime soon.


Source: Business Standard