Budget 2016-17 spares 2- & 3-wheelers, but taxes passenger vehicles

If the Indian auto industry, more so the passenger car sector, was looking hopefully at the Budget to give a fillip to sales in the upcoming fiscal year 2016-17, it did not contend with finance minister Arun Jaitley’s Union Budget 2016-17.

The Budget, the third one from the current government, is heavily focused on investment in rural India and infrastructure development. Of specific concern to the domestic automobile industry is the infrastructure cess of 1% on small (not over 4 metres long and engine capacity not exceeding 1200cc) petrol, CNG and LPG-powered cars; 2.5% on diesel-engined cars (not over 4 metres long and not exceeding 1500cc); and 4% on higher-engine capacity (read above 1.5 litre), SUVs and bigger sedans (read above 4-metres long). The cess has been levied citing “The pollution and traffic situation in Indian cities is a matter of concern.”

The finance minister also proposes to “to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of Rs 10 lakh).

The infrastructure cess has not been levied on three-wheelers, electric vehicles, hybrid vehicles, fuel cell-powered hydrogen vehicles, vehicles registered for use solely as taxi, cars for the physically challenged and ambulances. The two-wheeler sector, surprisingly, has escaped the finance minister’s levy.