Maruti SX4, Honda Civic and other luxury cars may become cheaper by Rs 50,000, if a proposed duty cut being discussed by the government, gets implemented. The ministry of heavy industries has written to the finance ministry to waive off the specific excise duty levied on mid-size and top-end cars last year, said a top government official.

Earlier the government had imposed an additional tax of Rs 15,000 on cars having engine size between 1,500-2,000cc and Rs 20,000 on all vehicles beyond 2,000cc. But the actual impact on the selling price of cars was much higher, as the tax was imposed on ex-factory price of vehicles over which consumers have to incur the burden of sales tax and other local levies.

On the sidelines of a Ficci seminar in Delhi, Surajit Mitra, additional secretary at the heavy industries ministry said “There is no rationale to continue with the specific duty, as it makes the tax structure unfair for a particular segment of vehicles.” The additional tax, which was to dissuade consumers from buying the gas guzzling vehicles, has impacted sales of premium cars such as the Honda Civic and the Toyota Corolla.

Sales of premium cars fell 20% to 33,642 units in the last fiscal while there is no time frame for withdrawing the tax, it could bring down the price of these vehicles by Rs 20,000 to Rs 50,000 per car.

“We have been hit by the specific excise duty and sales of our Civic sedan more than halved to 7,851 unit’s last fiscal. Other vehicles like the Accord and CRV sports utility vehicles have also been impacted,” said a senior executive of Honda Siel Cars.

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Posted by Amrith K.A on 6 May, 2009 5:23:42 PM IST #