Tax on SUVs likely

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A proposal to levy an annual road tax -higher by up to Rs 50,000 for diesel SUVs than petrol driven ones -has been made to the Union finance ministry to help reduce the fuel subsidy burden, Kirit Parikh, who heads a thinktank, on Monday said.

The auto industry, however, said any such step to impose additional taxes on the sector will not “make sense“.

Parikh, who was roped in by the government to check the mounting fuel subsidy burden, said diesel prices should be made market-driven after fixing the subsidy cap at Rs 9 per litre.

A former Planning Commission member Parikh now heads the think-tank Integrated Research and Action for Development.

“Instead of looking at a one-time diesel tax on new purchases, the alternative could be to abolish the existing one-time road tax and make it annual and apply a differential between petrol and diesel vehicles,“ Asked what could be the difference on road taxes between diesel and petrol driven vehicles, Mr Parikh said: “For normal cars, it can be higher by between Rs 10,000 and Rs 20,000 for diesel version and for the sports utility vehicles (SUVs), it should be higher by up to Rs 50,000.“

Reacting to the development, Society of Indian Automobile Manufacturers (Siam) vice-president Vikram Kirloskar, who is also the vice-chairman of Toyota Kirloskar Motor, said: “Today, 45 per cent of selling price of a vehicle is tax and any additional tax does not make sense.“

Calling for deregulation of diesel, he said: “We don't want diesel vehicles to be over-taxed. We would rather have market pricing of diesel.“

Kirloskar said the industry's views would be presented at the pre-budget meeting today with finance ministry officials, including the revenue secretary.

“We want reduction in taxation and we will share our view on how to spur growth of the automotive industry,“ Toyota Kirloskar vice-chairman said.

Supporting the industry, heavy industries and public enterprises minister Praful Patel said: “We need to encourage manufacturing in India and diesel is the new technology, which require huge investments and we should not do anything, which will discourage the major investments.“

Commenting on ways to reduce diesel subsidy burden, Parikh said as hiking diesel prices fully to the market rates is not possible at the moment, the government must consider an alternate mechanism by taking into account the current level of under recovery of the fuel.

“What we can do is fix the subsidy cap at Rs 9 per litre and make the diesel price market driven so that it can increase or decrease as per the international price,“ Parikh said.