30% excise duty on SUVs to remain, sedans may be exempted

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  • March 22, 2013
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When the 2013 budget was announced, it had annoyed a lot of four-wheeler manufacturers who had SUV as part of their portfolio. The manufacturers expected the Government to roll back this excise duty but it is now learnt that duty on SUV won't be ceased

Honda CRV in action



The Finance Ministry is unlikely to revise the excise duty that was announced on Sports Utility Vehicles (SUVs) in the Union Budget 2013-14, ET Now reported. The 30 per cent excise duty is applicable on SUVs that are 4 metre or above in length. SUVs with 170 mm ground clearance are also eligible for the excise duty. 


Meanwhile, to clear the air over higher excise levied on SUVs; the government is trying to rectify the classification by introducing the concept of two-box vehicles that would remove the extra financial burden on some cars currently paying more tax. Certain long cars normally referred as sedan have come under the SUV definition of the government and ended up paying higher taxes after the February 28 budget. 


Maruti SX4, Toyota Corolla Altis and Honda Civic, along with some of other popular sedans, are being taxed at a higher 30 per cent excise duty, even as most sedans continue paying the regular 27 per cent tax. All such longish sedans are called three-box vehicles (due to an attached boot), while compact cars like hatchback and the utility vehicle range, including SUVs, are referred as two-box vehicles due to their different structural design.

Audi Q5 in action



The higher tax component on these sedans, which carries specs similar to SUV as classified in the budget, had led to hikes in their price. Any vehicles with over and above the 4-metre length, 1500cc engine along with 170mm ground clearance are paying higher 30 per cent tax while sedans continue to pay the regular 24-27 per cent tax depending upon their classification. 


According to government sources, because of the definition, some unintended vehicles have come into this classification and to sort the matter out, the concept of two-box vehicles is being contemplated. "It would remove the ambiguity in the classification and possibly tax only the right SUV without touching any cars and sedans," the person said preferring not to be named. The higher budgetary tax had increased prices in the range of Rs 15,000 to Rs 35,000 on these popular cars in an already subdued market. 



Renault Duster in action



Car sales had dipped 26 per cent in February, its worst fall in the past 12 years. Sales of sedan have consistently been falling in the current fiscal and dipped 5% to 2,02,015 units in the April-February period. Some reclassification is expected to get these sedans clubbed as SUV off from the 30% tax duty structure. According to the auto industry apex body, the Society of Indian Automobile Association, it has approached the government to get clarity on the issue with the finance ministry. 

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