In his budget speech today, the Finance Minister made all new car buying a costlier exercise. While he announced that a 1% additional tax on cars costing above Rs 10 lakh, he has also made small cars more expensive.
FM Jaitley announced that a 1% infra cess will be levied on small petrol cars on one hand while on the other a 2.5% infra cess will be imposed on diesel cars. He also said that a 4% additional levy will be imposed on high-capacity passenger vehicles and SUVs.
According to CRISIL, "The additional 2.5-3.5% cess will further pull down demand for diesel cars & SUVs. Currently, 40% of total passenger vehicle sales are of diesel vehicles."
Exempted from the above infrastructure cess are three wheelers, electric, hybrid and hydrogen vehicles. Moreover, motor vehicles registered as a taxi, cars for physically disabled and ambulances are also exempt.
The Supreme Court earlier in December 2015 had banned sale of diesel vehicles with engines of 2000 cc and above in the National Capital Region till March 31,2016. Now, Mr. Jaitley announced that this is a move aimed at checking pollution and encouraging use of hybrid cars. Perhaps there is an opportunity for car makers in the guise of a road bump.
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