Government to exempt sedans from 30 per cent excise duty

Friday 22 March 2013, 12:02 PM by

The government of India is mulling to revive the categorisation of Sports Utility Vehicles (SUVs) by introducing the idea of two-box models, which is expected to eliminate the additional financial burden on few models for paying more tax. Generally, a number of long cars, which are referred as sedans, have now appeared in the government’s definition of a SUV and finally ended up with paying higher taxes after the release of Union Budget.

Government to exempt sedans from 30 per cent excise duty | CarTrade.com
Government to exempt sedans from 30 per cent excise duty

Some of the widely popular sedans of the Indian auto market like Maruti Suzuki SX4, Toyota Corolla Altis and Honda Civic, amid others, are all now being taxed higher at 30 per cent excise duty. Earlier, all these models were attracting a tax of 27 per cent, which has been increased after the proposed hike in Union Budget. Interestingly, all these vehicles are said to be three-box vehicles, owing to an attached boot, whereas the compact cars like utility vehicle range and hatchbacks, are termed as two-box vehicles because of their different designing structure.

The implementation of a higher tax on these sedans, which generally have similar technical specifications to that of a SUV, has increased their prices. Moreover, any vehicle which has a length of over 4-metre, an engine capacity of 1500 cc along with a ground clearance of 170 mm is to attract a higher tax of 30 per cent, whereas sedans continue to attract the regular 24 to 27 per cent tax, according to their classification.

A source close to the development process said that few unintended vehicles have appeared into this classification, which has contemplated the idea of two-box vehicles. Without revealing his identity, he was quoted as saying, “It would remove the ambiguity in the classification and possibly tax only the right SUV without touching any cars and sedans.”

The increase in tax, according to Union Budget, has increased the prices of few popular cars by around Rs. 15,000 to Rs. 35,000, in an already muted car market. During February 2013, the sales of cars witnessed a fall of 26 per cent, which happens to be the worst in last 12 years. In the ongoing fiscal, the demand for sedans dipped by 5 per cent, amounting to 2,02,015 units. However, some re-categorisation is anticipated to implement in this segment, which will keep them away from the 30 per cent excise duty SUVs. Considering the view of apex auto industry lobby, Society of Indian Automobile Association (SIAM) said, “We have raised the issue with the concerned ministry to remove the anomaly.”

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