The government has tightened norms for import of cars and sports utility vehicles under the Export Promotion Capital Goods Scheme (EPCG) by hotels, travel agents and others connected with the tourism industry.

"In order to ensure proper and intended use of vehicles under EPCG scheme, customs authorities will endorse that such vehicles have to be registered as a vehicle 'for tourist purpose only' while clearing such vehicles. This would make purpose of import of vehicles absolutely clear and would also facilitate registration," the directorate general of foreign trade (DGFT) said in a circular.

Cars imported under EPCG scheme in the past would also have to conform to the new norm and be re-registered as tourist vehicles, the notification added.

While the basic customs duty imposed on foreign cars is 114 per cent, firms engaged in tourism-related activities, including hotels, can import them at 3 per cent under the EPCG scheme.

Hotels and tour operators import these cars for the use of foreign tourists.

The circular comes in the wake of the government detecting large-scale misuse of the scheme. Vehicles imported under the EPCG scheme often end up in the open market.

The revenue department had detected many cases of cars imported under the EPCG scheme being used by high networth individuals, the statement sid, adding, these people benefit from the lower import duty under EPCG.

As per the scheme, hotels and tour operators, with foreign exchange earnings of Rs1.5 crore or above in the preceding three years are eligible for concessional import of cars and SUVs.

Import of cars under the EPCG scheme, which used to attract an import duty of five per cent in 2006-07, has been brought down to three per cent in 2007-08. Firms taking benefit of EPCG has to export eight times the duty saved in a period of eight years.