Tax On Diesel Vehicles Could Increase By 2 Per Cent

Diesel vehicles in India might soon get more expensive yet again. According to a circular issued by the Ministry of Road Transport, a recommendation to increase taxes on diesel vehicles by up to 2 per cent has been proposed by the Ministry while at the same time asking for a further reduction in taxes for all electric vehicles. Under the current taxation structure post GST, the taxes for diesel and petrol cars were under the same category and were decided on the engine size and size of car. With this new proposition coming into play and with a higher taxation on diesel proposed, the GST rates on cars across the board could change once again.

4/4 In order to promote alternate fuel for vehicles the GoM has proposed liberalisation of permit system for electric vehicles.@nitin_gadkari @PMOIndia @transform_ind

— MORTHINDIA (@MORTHIndia) April 20, 2018

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Currently, the taxes on diesel cars less than 4 metres in length and less than 1.5-litres under the new GST structure is at 31 per cent. With the new proposed 2 per cent hike, the rates could be as high as 33 per cent - almost the same as the taxes were before the GST structure came into place. The increase in taxes could affect popular cars like the Maruti Suzuki Swift and Swift Dzire, Hyundai i20, etc. along with sub compact SUVs like the Ford EcoSport, Tata Nexon, Maruti Suzuki Vitara Brezza, and a whole range of sub compact sedans like the soon to be launched Honda Amaze.

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The taxes on SUVs, which are already the highest taxed vehicles in the auto sector could go up even further dampening the mood of the buyers - especially if it comes into effect just before the Indian festive season kicks in. Taxes on SUVs could be as high as 52 per cent while taxes on midsize and luxury cars could go up to 47 per cent and 50 per cent respectively.

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That said, the move to call for lower taxes on electric cars is a welcome one. Currently, even though electric cars are pegged at 12 per cent under GST, they are still considerably more expensive than their internal combustion engine counterparts. A move to lower taxes could mean lower end prices in turn luring a large plethora of customers to opt for these cars - especially in years to come.