Budget 2016 Update: 1% additional tax on cars costing above Rs 10 lakh. 1% infra cess will be levied on small petrol cars. A 2.5% infra cess will be imposed on diesel cars. 4% additional levy will be imposed on high-capacity passenger vehicles and SUVs.
Apart from the above mentioned taxes which have been newly introduced, Excise Duty as applicable earlier would continue to be levied.
Excise Duty is levied at the time of manufacture of any product in India. Excise Duty on Cars is also levied at the time of manufacturing. The rate of excise duty on cars is decided by the Central Govt and is the same across India.
The rate of excise duty on cars is different for different categories of cars and depends on their size and engine.
Rate of Excise Duty on Cars
The different excise duty rates on manufacture of cars were reduced in the Budget 2014 and the revised rates are mentioned below.
| Condition 1 | Less than 4 Metre and | More than 4 Metre and | ||
| Condition 2 | In case of Petrol Cars Less than 1200 cc OR In case of Diesel Cars Less than 1500 cc | In case of Petrol Cars Less than 1200 cc OR In case of Diesel Cars Less than 1500 cc | In case of Petrol Cars More than 1500 cc OR In case of Diesel Cars More than 1500 cc | More than 1500 cc AND Ground Clearance more than 170 mm i.e. SUV’s |
| Example | Maruti Alto, Hyundai i10 etc | Honda City, Hyundai Accent etc | Honda Accord, Hyundai Sonata etc | Toyota Fortuner, Ford Endeavour etc |
| Applicable from | Amended by Budget 2012 | Amended by Budget 2012 | Amended by Budget 2012 | Inserted by Budget 2013 |
| Excise Duty on such Cars | 8% | 20% | 24% | 24% |
Both Condition 1 and Condition 2 are required to be satisfied for the Rate to be applicable. In case any of the above condition is not satisfied the corresponding rate would not be applicable
4 Metre Condition
One condition that decides the rate of excise duty on cars is its size. If the length of the car is less than 4 metres, the excise duty levied is 8%. But as soon as the length increases to more than 4 metre, the excise duty more than doubles to 20%.
To avail this duty benefit to small cars, many car manufacturers have started reducing the length of their Cars to less than 4 metre. For eg: Maruti reduced to size of its Swift Dezire to less than 4 metres. Moreover, cars like Honda Amaze, Mahindra Quanto, Ford Ecosport have been launched with length less than 4 metre keeping in view the excise duty benefit given to small cars.
Excise Duty on SUV Cars
The definition of SUV’s as given earlier was those cars which are more than 4 metres in length, have an engine of more than 1500 cc and have a ground clearance of more than 170mm.
Although this definition was given for implement a higher rate of excise on SUV’s some sedans like Maruti SX4 and Toyota Corolla Altis also incidentally fall in this range. To prevent such sedans falling in this range the govt has issued a circular stating these cars are popularly known as sedans in common parlance as well as trade parlance, and therefore the Excise Duty levied on them should be as on Mid-sized cars only and not as on SUV’s (Refer: Circular No. 972/06/2013.CX).
Although, in the interim budget the Finance Minister reduced the rates of excise duty and excise duty rates on Mid-Sized Cars and SUV’s is now the same, earlier it was different and it is expected that the excise duty rates on SUV’s may be hiked in future and maximum excise duty be levied on such type of cars.
Excise Duty on Other Vehicles
| Particulars | Rate of Excise Duty |
| Ambulance | 12% |
| Two & Three Wheel Electric Motor Vehicles (i.e. Vehicles run solely on Electricity) | 6% |
| Hybrid Vehicles | 12% |
| Three wheelers (Run on fuels other than electricity) | 12% |
| Cars for Physically Handicapped | 6% |
