Speed breaker

New Delhi, May 28: The government has tightened the registration norms of luxury cars imported by tour operators as it tries to snuff out a scam that had engulfed Bollywood stars.

In a circular issued today, the directorate general of foreign trade (DGFT) said cars must be registered as “for tourist purpose only”.

Under an export promotion scheme, the government permitted the import of cars, sports utility vehicles and all-purpose vehicles on the payment of 5 per cent customs duty by hotels, travel agents, tour operators and tour transport operators provided they have foreign exchange earnings of Rs 1.5 crore or more in the year of import and the preceding three licensing years.

Importers of foreign cars are required to pay a hefty 105 per cent customs duty, otherwise. Several actors have misused the facility to acquire vehicles from travel agents in the past.

In October 2005, the directorate of revenue intelligence (DRI) seized illegally imported cars of actors Sanjay Dutt and Suneil Shetty.

The names of the stars cropped up during a probe into alleged irregularities committed by a firm that imported costly four-wheelers for bigwigs and film stars. Delhi-based Vacation Tours and Travels had imported a Hummer for Shetty and a Porsche for Dutt.

While the DRI confiscated Shetty’s Hummer, Dutt surrendered his Porsche through his personal staff. Shetty had to pay a fine of Rs 40 lakh to recover the vehicle. The travel firm had not complied with the import regulations while importing the vehicles to India, thus evading central duties.

“The changes being brought in now will plug loopholes and promote genuine transactions of motor cars and sports utility vehicles for use by hotels, travel agents and tour operators,” said Ganesh Gupta, president of the Federation of Indian Export Organisations.

The DGFT circular said the “move would make the purpose of import of vehicles ‘absolutely clear’, besides facilitating registration”. It gave the operators till August to comply with the registration norms.

Tax ruling

The income tax appellate tribunal today ruled that hoteliers can claim depreciation and consequent tax benefit on imported cars, provided they are used for guests.

“Depreciation is to be allowed if (imported) cars are used to carry incidental business,” said Vimal Gandhi, president of the tribunal, in a case involving a Mercedes Benz imported by Delhi-based hotel Marina.