Budget 2016: Auto cos to pay 1-4% infra cess across categories, says FM

The automobile industry was expecting simplification of tax structures and a reduction in excise duties, among other initiatives to propel growth in electric vehicles

February 29, 2016 / 15:26 IST

Shweta Mungremoneycontrol.comThe Finance Minister Arun Jaitley announced a 1-4 percent infrastructure cess on cars across categories, as he presented the Budget for 2016-17 on Monday.Citing that the pollution and traffic situation in Indian cities is a matter of concern. the FM proposed to levy a cess, of 1 percent on small petrol and CNG cars, 2.5 percent on diesel cars of certain capacity and 4 percent on other higher engine capacity vehicles and SUVs.

There will also be a tax collected at source of 1 percent on purchase of luxury cars exceeding value of Rs 10 lakhs. While the cess was not predicted, the automobile industry had a fairly crisp list of expectations to ease off the pressure on business.

Firstly, reduction in excise duties or at least simplification of the taxation structure by merging certain duties, eliminating multiple levies and varying rates across vehicle categories.

Currently, total tax rate on small cars is 30 percent, on large cars is 42 percent and SUVs is 51 percent. The Goods and Services Tax (GST) rate is expected to be 18 percent for small cars and 40 percent for large cars and SUVs

Second on the wish-list was removal of national calamity contingent duty (NCCD) or its merger with excise duty, as it seems unfair that the only other industries charged with this duty are alcohol and tobacco.