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Tax sops for big cars, imported hybrids ruled out

autos Updated: Jul 21, 2008 02:28 IST

Dashing hopes of big car-makers for an excise duty at par with small cars, finance minister P Chidambaram has ruled out extending tax concessions to larger vehicles.

He also said there was no scope for reducing duties on imported hybrid vehicles, although government could consider giving more tax incentives if they were manufactured in India.

"We are not giving any tax concessions to big cars because they are fuel in-efficient compared to the small car,” Chidambaram told PTI in an interview. He said the incentives to the small cars were given on the ground that “they are fuel efficient”.

The government has been gradually decreasing excise duty on small cars as part of plans to make India a global manufacturing hub. In 2006, the finance minister had cut excise on small cars to 16 per cent from 24 per cent and this year's Budget had brought it down further to 12 per cent.

Cars with a length of 1,400 mm with engine capacities of 1,200 cc for petrol and 1,500 cc for diesel qualify for the excise sop on small cars.

On the contrary, the government had recently imposed fixed excise duties on big cars. Engine capacity between 1,500 cc and 1,999 cc attracted a fixed duty of Rs 15,000, while those above 2,000 cc had to pay Rs 20,000 more.

On hybrid cars, Chidambaram said, “We will take a look at hybrid cars when they begin to manufacture them (in India).”

“When they manufacture and when the first car is ready to roll out that is when we will take a look at it (granting excise benefits).”

This year's Budget cut excise duty on hybrid vehicles to 14 per cent from 24 per cent.

The finance minister reasoned that India had a huge automobile base that should encourage them to set up manufacturing bases in order to enjoy tax benefits.

Amid reports that leading steel producers may raise prices from the first week of August, the finance minister has also said the government is in dialogue with the steel manufacturers to keep the rates under check.

“All I know is that the ministry of steel is talking to steel producers to persuade them to keep prices under check,” Chidambaram said.

Asked if government may take fiscal measures to ensure steel prices don't spiral after expiry of the three-month self-moratorium imposed by primary producers on their price line, the finance minister said: “I can't talk about fiscal measures,” the finance minister said. “I know that there is a dialogue between steel ministry and steel producers.”

Steel prices have since January shot up by about 50 per cent, triggering concerns that soaring rates of the alloy was augmenting inflationary pressures on the economy.