New Delhi: The government’s decision to increase excise duty on vehicles with higher engine capacities has not gone down well with car makers as they think it will affect the growth of the sector, already hit by rising input costs, inflation, costly finances and fuel prices hike.
“This unprecedented excise duty hike will adversely affect the large car, SUV (sport-utility vehicle) and MUV (multi-utility vehicle) markets in India. We are trying to maintain our prices as much as possible, but we have no choice but to pass it on to our retail prices,”said Toyota Kirloskar Motor Pvt Ltd deputy managing director, marketing and sales, M. Kawabata.
P. Balendran, vice-president, corporate affairs, General Motors India Pvt. Ltd, said, “The government has hiked the excise duty in expectation of additional revenue, but if the volume comes down, then the very purpose will in fact be defeated”.
The government on Friday hiked central excise duty by Rs15,000 for large cars, MUVs and SUVs with engine capacities ranging from 1,500cc to 1,999cc. A specific excise duty of Rs20,000 was also levied for vehicles with engine capacities of 2,000cc and above.
Imported cars such as Toyota’s Camry and SUVs such as Honda’s CR-V and Hyundai’s Tucson will also become expensive, said a finance ministry official. “The specific excise duty of Rs15,000 and Rs20,000 will also apply on imported cars as the CVD (countervailing duty) component will go up by the same amount,” Central Board of Excise and Customs member V. Sridhar said.
CVD is imposed on imported goods to protect the domestic manufacturers.
There had been confusion whether the additional duty would be applicable to imported vehicles or not.
Industry analysts added that the decision is unlikely to affect the import of high-end luxury vehicles that are imported by high net-worth individuals, but would help the government collect some additional revenue.