Forex

Dashing hopes of big car-makers for an excise duty at par with small cars, the finance minister, Mr 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, the 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 inefficient compared to the small car," Mr Chidambaram said. 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.

Asked if there were plans to extend tax incentives to imported hybrid cars, Mr Chidambaram said the government would do so only if they were manufactured in India. "Oh yes, we will take a look at hybrid cars when they begin to manufacture them (in India)," he said.

"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)," Mr Chidambaram added. 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.