| Date: |
05-06-2012 |
| Subject: |
FM decision on hiking excise duty on diesel cars soon: CBEC |
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Finance minister Pranab Mukherjee has proposed to hike the excise duty on diesel cars to make up for subsidy foregone on the fuel consumed in vehicles used by well-heeled individuals.
Pranab Mukherjee is expected to take a call on the proposal shortly. Central board of customs and excise (CBEC) chairman S K Goel hinted at increase in the excise duty in near future.
“The proposal is there and that is being examined by finance minister” Goel told newsmen on sidelines of a conference of customs, excise and service tax commissioners.
Excise duty on petrol cars with engine capacity below 1200 cc and diesel with engine capacity below 1,500 cc is 12 per cent. The duty on such cars with length exceeding four metres has been increased to 24 per cent from 22 per cent earlier.
Petrol and diesel driven vehicles with length exceeding four metres and engine capacity of over 1200 cc and 1500 cc respectively attract an ad-valorem duty of 27 per cent and a fixed duty of Rs 15,000. Excise duty on diesel cars with engine capacity of 1,000 cc and above like SUVs may be increased.
The move will make up for the subsidy foregone on the fuel consumed by individuals who can afford to pay.
Government move to levy additional excise duty on diesel cars may impact industry growth severely. “Diesel vehicles are the only ones generating good demand and it remains to be seen what kind of increases in taxes on diesel cars could be done. Automobile stocks had hit new lows when there was news during last budget that a tax may be imposed, but nothing had happened,” said Yaresh Kothari, senior research analyst, Angel Broking.
Kothari said the possibility was that cars with diesel engines up to 1,500 cc might be spared while a levy on utility vehicles above 1,500 cc looks more likely. This means that all locally produced vehicles from the Rs 6.2 lakh Mahindra Bolero (2,200 cc) to the Rs 48 lakh 3.0 litre BMW five-series at Rs 48 lakh will be hit.
In India, there is only one diesel engine below 1,000 cc (Chevrolet Beat). All other hatchbacks and sedans use at least a 1.3 litre to 1.5 litre diesel engines.
According to working group on petroleum at the Planning Commission, diesel used in passenger cars accounts for just 0.6 per cent of the diesel consumption in the country.
In 2011-12, the proportion of diesel cars sold in India rose to 37 per cent (0.96 million) of overall car sales at 2.6 million units. In 2010-11, just 23 per cent (0.57 million) of the 2.5 million vehicles were sold in diesel, according to industry estimates.
The subsidy on diesel moved up to Rs 14.36 from Rs 13.10 per litre a fortnight ago. In April – December 2011, the under-recoveries due to sale of diesel below the cost price by oil marketing companies was Rs 56,732 crore as against Rs 37,719 crore in same period a year ago.
Source : mydigitalfc.com
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