Cess of 4 % will make all cars costlier, especially SUVs
Mumbai: If you are planning to buy a car anytime soon, it will pinch you a little more as Finance Minister Arun Jaitely on Monday proposed levy of a clean environment cess of up to 4 per cent.
The move to make cars — small as well as luxury SUVs — costlier is aimed at controlling the rising levels of pollution and addressing the density of traffic. However, auto manufacturers feel introduction of the new tax will “dampen” the spirit of the sector.
“The pollution and the traffic situation in Indian cities is a matter of concern. I propose to levy an infrastructure cess of 1% on small petrol, LPG and CNG cars, 2.5% on diesel cars of certain capacity, and 4% on other higher engine capacity vehicles and SUVs,” Jaitley said in his speech.
With the levy of the cess, prices for all cars, which are priced over Rs 10 lakh will increase by 1%. The cars in the range of Rs 10 lakh and above are high-end sedans manufactured by automobile giants such as Honda, Hyundai, Tata, Mahindra, etc.
SUVs and high capacity cars face what the government calls a “high capacity tax”, which currently stands at 4% of the overall cost of the car. This move comes at a time when the growing levels of pollution in the national capital have become a point of discussion.
“We believe this would result in rise of prices across categories of passenger vehicles and would hurt the industry. Since the Government’s focus is only on rationalisation and simplification of taxes, the introduction of new taxes on vehicles will only dampen the spirit of the auto sector,” said Vinod Dasari, President, SIAM.
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However, Jaitley gave relief to environment-friendly vehicles. “Three-wheeled vehicles, electrically operated vehicles, hybrid vehicles, hydrogen vehicles based on fuel cell technology, vehicles which after clearance have been registered for use solely as taxi, cars for physically handicapped persons and vehicles cleared as ambulances or registered for use solely as ambulance will be exempt from this cess,” he said.
With the introduction of the cess, CRISIL expects demand for diesel cars to go down. According to CRISIL, “The additional 2.5-3.5 per cent cess will further pull down demand for diesel cars & SUVs. Currently, 40 per cent of total passenger vehicle sales are of diesel vehicles.”
