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Car prices will go up with the levy of infra cess, luxury tax – The Hindu

Car prices will go up with the levy of infra cess, luxury tax

Car prices will go up with the levy of infra cess, luxury tax

The Finance Minister proposed a cess of one per cent on puny petrol, LPG and CNG cars and Two.Five per cent on diesel cars. File photo

Prices of cars and utility vehicles will see an increase with the imposition of tax-related measures announced in the Union Budget for 2016-17.

While companies are working on details to signal the likely hike in prices, estimates indicate that the price increase for sub-10 lakh cars would be from Rs. Trio,000 to Rs. 45,000 per car.

In the case of luxury cars, it could be a few lakhs.

According to the budget speech, there will be a levy of one per cent infrastructure cess on petrol/LPG/CNG-driven motor vehicles of length not exceeding four metres and engine capacity not exceeding 1200cc; Two.Five per cent cess on diesel-driven motor vehicles of length not exceeding four metres and engine capacity not exceeding 1500cc; and four per cent for other big sedans and SUVs.

Also, there will be an extra one per cent ‘luxury tax’ on all the cars priced above Rs. Ten lakh and increase in service tax by addition of 0.Five per cent Krishi Kalyan cess.

The fresh tax measures come as frustration for the sector, which has been battling with fragmented recovery.

“The infrastructure cess of one per cent on petite petrol/CNG/LPG cars, Two.Five per cent on diesel cars and four per cent on higher engine capacity cars will affect the consumption in the already-stressed environment,” said Ajay Seth, Chief Financial Officer, Maruti Suzuki India.

“New tax measures could create higher costs and compliance cargo for an otherwise very taxed sector and be counterproductive to the positive measures in the budget,” said Gaurav Karnik, Tax Playmate – Automotive Practice, Ernst and Youthfull.

Several industry representatives and analysts argued that the government should have taken progressive steps such as introducing a ‘scrappage incentive scheme’, to keep older cars off the road.

“Such a policy will benefit the environment, reduce fuel consumption and propel further request for greener and efficient vehicles,” said Sumit Sawhney, Country CEO & Managing Director, Renault India.

For the luxury car segment, the fresh taxes are yet another frustration after the Supreme Court ban on diesel-powered luxury vehicles in the Delhi region.

Joe King, Head, Audi India, said the budget measures would have a negative influence on the automobile industry. “We are disappointed that the industry’s request on reducing excise duty has not been addressed. On the contrary, infra cess has been added which will further affect the price and consequently request. Also, we need to evaluate the influence of extra tax levy on purchase of cars above Rs. Ten lakh,” he added.

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