The auto industry has asked the government to simplify excise duty slabs on cars by changing the three-tier system to a two-tier one. It also wants duties slapped on larger cars to be lowered to 20% from 24%.
As part of the Budget recommendation, the request was presented in a letter addressed to the revenue secretary by the auto industry body Society of Indian Automobile Manufacturers (Siam) last month.
“We feel a 24% duty on large cars is too high and merits a re-look. We have urged the govrenment to bring it down to 20%. The three rates on duty make things very complicated,” said an industry official.
Currently, the government charges excise duty on cars produced in India under three slabs ranging from 8% to 24%. Vehicles under four metres of length and below 1,500cc engines have to pay a significantly lower 8% duty, designed to benefit the small car market, compact sedans and compact SUVs. This first slab has in fact led to the growth of new segments that can be seen only in India.
In the second slab, cars above four metres length but with engines smaller than 1,500cc have to pay 20% duty, while the third slab of 24% excise duties is for cars that are above four metres and with engines bigger than 1,500cc.
Till last year, the system had been more complicated with a five-tier system. But the former UPA government had simplified it to a three-tier system in the interim Budget. Under the previous system, SUVs attracted excise duties as high as 30%.
Besides simplification of the excise duty slabs, SIAM has also asked the government to implement the Goods and Services Tax (GST) at the earliest and starting a fleet modernisation programme that will give incentives for replacing ageing trucks with new vehicles. The latter will give a strong push to the CV segment that has seen sales plummeting for the last few years.