While carmakers heaved a sigh that the union budget did not hike taxes on diesel cars, a 2 percentage point increase in excise duty rates on large cars has left them with no option other than raise prices, say leading carmakers.
The spike follows the budget announcement to increase the base excise tax on most goods produced in India to 12 per cent from 10 per cent.
Consequently, excise duty on cars currently taxed at 22 per cent would increase to 24 per cent, and excise duty on cars currently taxed at 22 per cent with an additional Rs15,000 per vehicle charge would increase to 27 per cent.
Car sales in India have been slowing down for the past few months with a reduction in fuel subsidy, tighter credit and a general increase in car prices.
Overall car sales in India are expected to post a marginal growth in the current fiscal, but are expected to grow more than 10 per cent in the coming fiscal. But an additional tax would make it that more difficult for automakers to sell products cheaper in a slowing market.
The finance minister announced an increase in excise duty on large cars -- with petrol engines above 1.2 litre or diesel engines above 1.5 litre or with length exceeding 4.0 meters -- to 24 per cent from 22 per cent.