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In forthcoming budget: Rural utility vehicles may get excise duty relief
February, 17th 2011

Vehicles meant for rural markets may get some excise duty relief in the forthcoming budget , helping customers to enjoy competitive pricing.

"There is a consensus to subsidise some specific vehicles that have a mass market in rural areas. We have been looking at options to de-classify these from other vehicles that are in highest tax net so that rural users can enjoy competitive prices like tractors and other farm equipment ," a senior ministry of heavy industry official said.

The Heavy Industry Ministry is the nodal ministry for the automobile industry. Utility vehicles that attract customers from smaller towns and rural markets carry an excise duty of 22% like BMW X1 or the Chevrolet Captiva, which are referred to as sporty utility vehicles.

In the 2006-07 budget, government had drastically cut excise on small cars -- vehicles under four metres and 1,200 cc petrol and 1,500 cc diesel engines -- to 16% from 24% that catapulted massive demand as the huge price difference expanded domestic market to over 2 millions units per year.

Heavy Industries, which is the nodal ministry for the automobile industry has now put an argument that there is no rationale to tax all vehicles with different potential customer in the same bracket and the structure needs to be changed. "These utility vehicles mostly are under . 10 lakh and cater to a wider mass of customers and have multiple commercial applications.

Many of these also have direct application in agriculture , which is critical for the sustenance of the rural economy but these vehicles pay higher excise (22%) along with additional . 15,000 tax levied on luxury cars," the official added.

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