Tax brakes

By Priyanka Chandola
Published: Tuesday 15 July 2008

the Union Ministry of Finance imposed an additional duty of Rs 15,000 to Rs 20,000 per vehicle on big cars and utility vehicles on June 13. The decision comes as a knee-jerk reaction to the skyrocketing international crude prices. While welcoming the move as a step forward, experts said staving off an energy crisis would require making the tax progressively harsher and linking it with fuel economy standards for vehicles.

The Rs 15,000 duty slapped on vehicles with engine capacity between 1,500 cc and 1,999 cc will be in addition to the existing 24 per cent central excise duty on big cars. There is no change in tax on cars with engine capacity below 1,500 cc. Vehicles with engine capacity of 2,000 cc and above have to pay Rs 20,000 as additional specific duty.

Sujit Patwardhan of Parisar, an ngo working for environment and sustainable development in Pune, welcomed the government decision. He suggested that the money collected from these levies be used exclusively for improvement of public transport systems, and not more roads and flyovers.

The price of cars may go up by more than the additional duty. For Maruti SX4 (1,586 cc), for example, a customer will have to shell out Rs 20,000-22,000 extra, said a sales executive of Apra Auti (India), a Maruti dealer.

The automobile industry wants the government to withdraw the duty hike. The Society of Indian Automobile Manufacturers (siam), the top automobile industry body, said, "It is inappropriate for the government to increase the price of vehicles, especially since the industry is going through a downturn."

Stringent tax brakes are needed to check the steady drift towards bigger vehicles that use up more fuel in India. Already the share of mini cars (length up to 3.4 metres) in the passenger vehicles has dropped from 21 per cent in 2001-02 to 6 per cent in 2006-07.

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