Far from the incentives it was demanding, a price hike is what the auto industry gets from the Budget 2016. Prices of new cars are set to increase with a new infrastructure cess imposed on the automobile industry. The budget proposes a 1% infrastructure cess on CNG, LPG and petrol cars; 2.5% on diesel cars and 4% on vehicles with ‘higher engine’ capacity. The engine cubic capacity though has not been specified yet but is expected to be around 2000cc and above. Adding to the industry’s woes, the Finance Minister has proposed an additional 1% luxury tax on the purchase of vehicles priced 10 lakh or above.
One of the manufacturers to be majorly affected is Mahindrawith its bestselling Scorpio and XUV500 set to witness a major bump in prices under the new taxation policy. Dr. Pawan Goenka, Executive Director, Mahindra & Mahindra said, “On the face of it, imposing up to 4% cess for Passenger vehicles is a concern for the auto industry. However, one has to take it in stride, in view of all the priorities that we have for our economy and we in the industry have to manage it. Would have been good if some of the additional revenue from this cess was used to phase out older vehicles.”
So in effect, small petrol cars will attract the 1% infrastructure cess witnessing a marginal hike in prices, while small capacity diesel cars under 10 lakh will attract a 2.5% hike. However, the cars most affected are the ones above the 10 lakh mark, which will attract the additional 1% luxury tax. That means, petrol cars above the 10 lakh price point will have to bear a 2% cess, and diesel cars above 10 lakh – 3.5% and higher displacement cars – regardless of fuel type – will have to then bear a 5% cess under the new policy.
Most manufacturers say they are studying the Budget before taking any decisions, but we have to assume that they will pass on this burden to the consumer. So how does this affect ex-showroom prices? The highly popular Maruti Suzuki Alto 800 which will now attract the 1% additional tax, will see prices jump approximately 2583 to 2,60,896. Similarly, the Hyundai Grand i10 diesel will attract the 2.5% tax, pushing its price to 5,76,932, a 14,071 price increase. The difference further increases for vehicles above the 10 lakh mark as SUVs like the Toyota Fortuner get dearer by a hefty 1,20,860 attracting an overall 5% jump in tax. That takes the base price of the Fortuner to 25,38,060. All prices are ex-showroom Delhi and the increased prices indicative. The new tax policy will also affect the upcoming Innova Crysta in a big way.
[“Source-ndtv”]
