Excise levy on large cars baffling

Posted on    16 June 2008

Author : Murali Gopalan/DNA

Content : The government's move to impose heavier excise duty on large cars and utility-vehicles is baffling especially when it comes barely ten days since fuel prices were hiked.

The levy will be Rs15,000 for cars between 1500cc and 2000cc and Rs20,000 where engine capacities exceed 2000cc. Effectively, this means that models like the Scorpio, Sumo, Innova Logan and many others will become dearer. In fact, on-road prices will end up being 10% more because of other levies like insurance, sales tax and octroi.

This is yet another twist to the excise duty classification norms. The government has already defined small cars as those which are up to four metres long with engine capacities capped at 1500cc for diesel and 1200cc for petrol versions. Models which qualify enjoy a lower duty of 12% while it is 24% for all others. The bizarre part is that the petrol Swift is a large car because of its larger engine while its diesel sibling falls under the small car definition.

What then has prompted this recent move? According to top sources, the real problem lies in the growing consumption of diesel. This is because diesel imports have become hugely expensive and the oil companies are just not able to cope with the surging demand. Is a levy on large cars the solution? And why not look at all diesel cars in that case, irrespective of their engine capacities? It is very clear that not much thought has gone by the government into this exercise. What is even more disturbing is that some companies have been spared the burden which has already set tongues wagging within the industry on "excessive lobbying by interested parties". It remains to be seen now how the customer reacts to this move. The buyer of the Logan or Innova may now go in for something like the City.


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