If you are in the market for a sports utility vehicle, get ready to dig deep into your pockets. The government on Thursday increased the excise duty on sports utility vehicles from 27% to 30%, which will mean a price rise ranging from Rs 15,000 for a no-frills Mahindra Bolero, to up to Rs 75,000 for a Toyota Fortuner.
In the process, the government’s definition of what constitutes SUVs has given rise to some heartburn. “SUVs occupy greater road and parking space and ought to bear a higher tax,” said finance minister P Chidambaram in his budget speech.
“I propose to increase the excise duties on SUVs from 27% to 30%. However, the increase will not apply to SUVs registered as taxis.”
The government has classified as SUVs, all vehicles larger than 4 metres in length, having an engine bigger than 1,500 cc and a ground clearance of more than 170mm.
Ironically, according to this definition, a sedan such as the Maruti SX4 or Toyota Corolla becomes an SUV, while vehicles prominently marketed as SUVs such as the Ertiga, Renault's Duster and Mahindra's Quanto do not.
“I do not understand the logic of taxing vehicles based on ground clearance,” said Pawan Goenka, president (automotive sector), Mahindra and Mahindra. “Why is it a demerit to have a higher ground clearance? I can understand if taxes were raised based on the carbon footprint and fuel economy.”
The move is expected to hit the utility vehicle segment, which has been the fastest growing category in an otherwise depressed overall market in the last two years. In this financial year up to January, utility vehicles have grown by almost 57%, while passenger car sales have declined by 2%.
The impact would be more on low priced multi utility vehicles largely used as people movers across the country.
“We will pass on the increase in duties completely to the customers,” Sandeep Singh, deputy managing director (marketing), Toyota Kirloskar. “There will be a substantial increase in the prices of some of our cars.”