Government squeezes fuel-guzzlers, imposes extra tax on large vehicles

Even as the government grapples with record losses of public sector oil marketing companies subsidising fuel as crude reaches record prices, it has come out with a new tax designed to discourage the buying and usage of high-capacity, fuel-guzzling automobiles.

For cars, multi-utility vehicles (MUVs) and sports utility vehicles (SUVs) of 1500cc to 1999cc engine capacity, a specific duty of Rs 15,000 a unit has been imposed. The duty will be Rs 20,000 a unit on those with a capacity of 2000cc and above.

The specific excise duty, which would be in addition to the existing ad valorem duty of 24 per cent, will come into force with immediate effect, an official release said. The tax will be levied on vehicles manufactured or assembled in India, officials said later.

The duty structure for cars with an engine capacity up to 1500cc would remain unchanged. Such cars account for as much as 80 per cent of all vehicles sold in India.

This decision further increases the disparity in duties imposed on small and big cars in India. Cars with a engine capacity of up to 1200 cc with a maximum length of 4 metres attract an excise duty of 12 per cent. Cars with a bigger engine capacity are charged double that rate.

''The big cars are used by the affluent sections of the society and they should be ready to pay a higher charge in the wake of rising global crude prices,'' an official in the department of heavy industry (DHI) said, adding that the move was anticipated as global crude prices are hovering at $135 per barrel and anticipations are rife about the prices touching the $200 mark anytime during the year.