Govt mulls excise cut for the utility vehicles

After small cars, it may be the turn of utility vehicles to get an excise boost. The government may reduce excise duty on utility vehicles currently...

After small cars, it may be the turn of utility vehicles to get an excise boost. The government may reduce excise duty on utility vehicles currently — at 24 per cent, to help improve the state of public transport in the country. The ministry of heavy industries and public enterprises has sought proposal from the auto industry to improve public transport and is open to the idea of an excise cut. This would benefit cars like M&M’s Scorpio, Bolero and Commander, Chevrolet Tavera and Force Motor’s Trax and Traveller.

“While it is good that the passenger car segment is doing well, we should not forget that our public transport in still in a disarray and needs to be improved,” said heavy industries and public enterprises minister Santosh Mohan Dev. “We do not have many versatile vehicles like the Jeep today which can go on any road. I am open to reducing excise duty on utility vehicles if that improves public transport. Let the industry come up with a proposal on this and we will consider it.”

The industry has welcomed the suggestion but wants that the excise duty on all vehicles should be brought down to 16 per cent first before any incentive is given. “We have always said that utility vehicles should get preferential treatment as they provide a means of transport to the poor especially in rural areas,” said Society of Indian Automobile Manufacturers director general Dilip Chenoy. “Excise duty on all vehicles should first be brought down to 16 per cent. Any incentive to any segment can only be given after that.”

Even the auto policy 2002 under section 9 which deals with excise duty had recommended that along with small cars, multi utility vehicles were also identified for fiscal incentives. While small cars were identified owing to India’s potential as a global small car hub, utility vehicles were selected for the same reasons that the minister has talked about.

But an excise cut beyond 16 per cent could be problematic. The next slab for duties are at 8 per cent but the industry may not want such low duties at this point. “Duties at 8 per cent could mean credit which would not be utilised by auto companies. Hence the industry would prefer a higher rate of excise but a figure could be reached only after due deliberations,” an industry insider said.

Road Ahead

• Utility vehicles may see excise cut from 24 to 16%. Heavy industry ministry has sought proposals from industry.

• MUVs play a significant role in public transport in rural India. Of the 2 lakh utility vehicles sold in a year, a large chunk goes to rural parts.

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• SIAM wants excise duties on all automobiles to be rationalised to 16% first.

• Auto policy 2002 identifies small cars and utility vehicles for preferential treatment.

• Small cars received a boost last year when excise was cut from 24 to 16%.