Excise, Customs Duties on Large, Foreign-Made Vehicles Hiked

New Delhi: Sedan and foreign-made luxury cars will cost more from April 1, 2012 as Finance Minister Pranab Mukherjee proposed to raise excise and customs duties on large cars as well as imported luxury vehicles. "I propose to enhance the duty from 22 percent to 24 percent (large cars)," Mukherjee said, presenting the union budget 2012-13 in the Lok Sabha. The increase in excise duty will affect the price of petrol-powered vehicles with engine capacity of under 1,200 cc and diesel cars with engine capacity under 1,500 cc whose length exceeds four metres. "In the case of cars that attract a mixed rate of duty of 22 percent plus 15,000 per vehicle, I propose to increase the duty and switch over to an ad valorem (according to value) rate of 27 percent." Currently, large cars attract excise duty depending on their engine capacity and length. For import of completely built units (CBU) of large cars, multi and sports utility vehicles with cost exceeding $40,000 (2,000,000), per car custom duty will increase to 75 percent from 60 percent. Mukherjee, however, provided excise duty relief for electric and hybrid vehicle manufacturers. Excise duty on replacement batteries for supply to electric vehicle manufacturers registered with IREDA (Indian renewable energy development agency) or state nodal agency which is notified for the purpose by the new and renewable energy ministry for central finance assistance has been proposed to reduce from 10 percent to six percent. The excise duty on specified parts of hybrid vehicle has also been reduced from 10 percent to six percent. Reacting to the proposed excise hike, automobile major Tata Motors said it has decided to increase prices of its commercial and passenger vehicles with immediate effect. The company said the increase will be proportional to the increase in the excise duty proposed in the budget. Other auto companies like Maruti Suzuki are said to be also contemplating a price hike. Meanwhile, Lowell Paddock, president and managing director of General Motors India, expressed disappointment for the sector. "As far as the automotive industry is concerned, it did not meet the expectations. The industry did not expect any increase in excise duty on passenger cars," Paddock said. "The industry expected the government to announce some measures to fuel demand of vehicles which have also not happened."