Mar 26, 2013, 08.44 PM IST | Source: CNBC-TV18

Yashwant Sinha writes to FM, calls SUV tax discriminatory

The Standing Committee on Finance has called the government's move to impose additional tax on SUVs as discriminatory. Chairman of the Committee Yashwant Sinha has written to P Chidambaram opposing the move to Tax SUVs and he wants luxury cars to be taxed instead.

The Standing Committee on Finance has called the government’s move to impose additional tax on SUVs as discriminatory.

Chairman of the Committee Yashwant Sinha has written to Finance Minister (FM), P Chidambaram opposing the move to tax SUVs and he wants luxury cars to be taxed instead, reports CNBC-TV18’s Ronojoy Banerjee

Last year’s key highlight of the Budget was the retrospective amendment because of which the industry was up in arms. This time, it is the SUV tax. Barely a fortnight after Praful Patel had written, now Yashwant Sinha is calling it discriminatory.

Also read: Hike in excise duty could hurt UV sales, says M&M's Goenka

There are principally two aspects in the letter which Yashwant Sinha has tried to bring Finance Minister’s attention on. One is the fact that while a Bolero which costs only Rs 7.5-8 lakh as compared to a luxury vehicle like a Mercedes-Benz S Class which costs over Rs 90 lakh, less than 1/10th (one tenth) of the value of a Mercedes-Benz S Class a Bolero now will be viable to pay a higher excise duty as compared to these luxury vehicles.

Yashwant Sinha wants more clarity on this front. The other thing that he has highlighted is the fact that there are only a handful of SUV manufacturers who are going to be impacted.

For instance Mahindra and Mahindra (M&M) will have five models that will be hit, Tata Motors will have about two models and General Motors also will have about two models.

However,  Maruti Suzuki ’s Ertiga which is the largest selling utility vehicle (UV) in the country today, will not be taxed. So also, Renault’s Duster will not be taxed. That is why Sinha feels that this is clearly discriminatory and needs to be corrected. He is hopeful that there will be a re-examination, but whether the FM will re-look at this issue is still unclear.

The indications from the finance ministry are that they will come up with a tighter definition of SUV, which will lead to exempting some sedans which had also fallen into this category based on the parameters that the finance ministry had set out.

However, industry is still hoping that there will be an exemption based on price. Society of Indian Automobile Manufacturers (SIAM) had said that vehicles with an assessable value of Rs 12 lakh should be left out.

M&M stock price

On April 17, 2014, Mahindra and Mahindra closed at Rs 990.00, up Rs 14.65, or 1.50 percent. The 52-week high of the share was Rs 1054.00 and the 52-week low was Rs 741.50.

The company's trailing 12-month (TTM) EPS was at Rs 60.90 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 16.26. The latest book value of the company is Rs 238.22 per share. At current value, the price-to-book value of the company is 4.16.

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