New Delhi, March 1: Mahindra & Mahindra (M&M) wants the finance ministry to either roll back the additional excise duty on sports utility vehicles (SUVs) or redefine the category to incorporate all models.
In the budget for 2013-14, finance minister P. Chidambaram has hiked the excise duty on SUVs to 30 per cent from 27 per cent. However, the definition of SUVs in the fine print of the budget has led to confusion.
The tax hike applies to vehicles, which have an engine capacity of over 1500-cc, are over 4 metres and have a ground clearance of 170mm and above. This definition brings some variants of sedans such as the Toyota Altis, Maruti SX4 (petrol), Renault Fluence and Honda Civic within the excise duty ambit, analysts said.
The move will lead to customers paying Rs 25,000-40,000 more for SUVs such as the Mahindra Scorpio, Tata Safari and Toyota Innova, while premium SUVs such as the Toyota Fortuner are expected to get dearer by Rs 70,000. However, the hike does not apply to utility vehicles and SUVs registered as taxis.
Moreover, compact SUVs (below 4 metres) will remain in the excise duty slab of 12 per cent, which is good news for the Mahindra Quanto and the upcoming Ford EcoSport. At present, cars up to 4 metres and having a 1200-cc petrol, or up to 1500-cc diesel engine, are classified as small cars and taxed at 12 per cent.
“Either the tax should be rolled back or a level-playing field through an equitable definition should be brought in for all UVs and sedans,” Pawan Goenka, president (automotive and farm equipment sector) at M&M, told The Telegraph.
He said the definition of SUVs in the budget notification would lead to a lot of ambiguity. “Our concern is that among vehicles in the same price category, one may have to pay the higher excise duty and other may not,” Goenka said.
Car makers, including M&M, Tata Motors and Toyota Kirloskar, are expected to meet top finance ministry officials to seek clarifications and a rollback.
“Levying a 3 per cent higher duty on SUVs on the basis of higher ground clearance is disappointing as it slows down further growth and does not provide an equal competitive space to all players,” said Pravin Shah, chief executive (automotive division) at M&M.
Utility vehicles have witnessed strong sales this fiscal, even as the overall passenger vehicle industry saw sluggish growth. Sales of UVs were 4.51 lakh units against 2.88 lakh units sold in the same 10-month period of previous fiscal.
The budget proposal is likely to impact M&M the most as the company sells about 21,000 units of UVs per month and accounts for almost half the utility vehicle market.
M&M has reported a 11 per cent rise in total vehicle sales in February at 47,824 units. Passenger vehicle sales, which includes UVs and the Verito sedan, rose 14 per cent to 23,421 units.