SUV’s and Hatchbacks to get costlier

According to Union Budget 2016, an infrastructure cess has been announced on hatchbacks and SUVs.

India: According to the Union Budget 2016 announced by Finance Minister Arun Jaitley, the government will levy infrastructure tax on all four wheelers, including even small sized cars.

The government is ready to charge 1% additional infrastructure cess on small CNG and petrol cars. The tax is decided to be 2.5% for diesel cars and 4% for SUVs and other luxury cars. The new tax levied on the passenger cars will increase the price in coming months.

In addition to the infrastructure duty, an additional tax of 1% will be charged on luxury cars costing more than ten lakhs. This move of government is considered as a step to keep check on the increasing pollution across the country and also enhance the use of electric cars. The government is also considering to provide exemptions on environment friendly vehicles such as electric and hybrid cars.

This increase in tax is further anticipated to increase the pressure on SUVs and luxury car manufacturers who are already witnessing the declining sales due to recently imposed ban on registration of diesel vehicles of more than 2000 cc in the National Capital Region till March 31, 2016.

The recent report published by TechSci Research, “India Tyre Market Forecast and Opportunities, 2020” indicated that passenger car tyre market in India is second largest tyre segment. It is projected that with increasing prices of passenger cars in the country, the sales and production of passenger cars would witness significant difficulties in coming years consequently affecting the demand for OEM tyres in the country.: