A growth impetus for utility vehicles (UVs) priced below R10 lakh may soon be around the corner with the government actively considering an excise duty hike rollback for models that fall in the price bracket before the Budget session resumes in Parliament.
The finance ministry has now asked the auto industry to submit detailed sales data as per companies, variants and models by this week that will help it separate luxury SUVs, such as Toyota Fortuner and BMW X1, from the more mass market models such as Mahindra Bolero, Tata Sumo, Force Trax and Chevrolet Tavera, sources told FE.?The plan is to limit the excise hike to premium models only.
?The finance ministry has asked for further details on SUVs such as sales statistics in terms of value, and model-wise, company-wise and variant-wise divisions. The heavy industries ministry is consulting the auto industry for this data and will send them a reply this week. Some relief is definitely expected since car sales are severely sluggish today,? a government official said.
The current intent of the finance ministry, which in the Budget this February raised excise duties on SUVs by 3% to 30% calling them luxury products, is to separate the mass market models used in smaller towns and rural areas from the premium models. The government is looking to keep mass-focussed UVs out of the tax hike in order to make them more affordable, encouraging economic activity in the hinterland where such vehicles are often used for local transport of goods and people.
The plan to spare sub-R10 lakh SUVs from the duty hike came after minister for heavy industries Praful Patel wrote to finance minister P Chidambaram last month voicing industry concerns on the duty hike at a time when growth is sluggish. Patel said that while there should be no additional duty on SUVs, if the government does feel a need to increase duties, it should at maximum be for a single year and then rolled back. Any reduction of taxes is seen as a major boon for passenger vehicle makers since such mass market models represent about 80% of total UV volumes.