Finance Ministry mulls hike in excise on diesel vehicles

The finance ministry is examining a proposal to hike excise duty on diesel cars in order to reduce the consumption of subsidised fuel by car and sport utility vehicle (SUV) owners .

"The proposal is being examined by finance minister Pranab Mukherjee. Consultations are being held and appropriate decision will be taken by the government in due course," Central Board of Excise and Customs (CBEC) chairman S.K. Goel told reporters on the sidelines of the annual CBEC conference, which was inaugurated by Mukherjee.

The ministry of petroleum and natural gas had recommended levying of additional excise duty on diesel vehicles in order to reduce the consumption of subsidised diesel by the rich who use it to run big cars and fuel-guzzling SUVs.

However, Mukherjee did not implement the proposal in this year's Budget. But it appears that the proposal is still alive as the dieselisation of the economy has emerged as major cause for concern.

With the cost difference between petrol and diesel fluctuating from Rs 25 to Rs 30 a litre, sales of petrol cars have come down sharply while there is a waiting list for diesel vehicles due to the surge in demand. The latest figures show that diesel cars and SUVs account for 60 per cent of the total personal vehicle sales.

There has been a 29 per cent drop in the sale of Maruti Suzuki's small cars such as Alto, Wagon R and A Star which at one time were considered fuel-efficient but have now lost advantage due to the huge price difference between petrol and diesel.

According to the petroleum ministry estimates, 15 per cent of the country's total diesel sales are consumed by cars and SUVs.

Excise duty on petrol vehicles with engine capacity under 1,200 cc and diesel ones under 1,500 cc is 12 per cent. The duty on such cars with length exceeding four metres is 24 per cent. Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively attract an ad valorem duty of 27 per cent and a fixed duty of Rs 15,000. Mukherjee exhorted senior officials of the customs and excise department to sharpen their audit skills and conduct scrutiny of assessees' records to bring to the kitty any tax that might have escaped assessment, and detect frauds. While the need for trade facilitation and tax payers' satisfaction cannot be overemphasised, any mala fide and corrupt practice to evade payment of legitimate dues needs to be handled as per established procedure of law, he added.

Mukherjee hoped that CBEC will be able to meet the indirect tax collections (central excise, customs and service tax) target of Rs 4,99,694 crore fixed for 2012-13, which is 27 per cent higher than the previous year.

Despite a slowdown in growth and the duty cuts effected on petroleum products in June 2011, the indirect tax collection had touched Rs 3,92,781 crore in 2011-12.

Mukherjee is worried over the slowing economy but is pinning hopes on global crude oil prices coming down in the days ahead and a normal monsoon to revive the economy.

Courtesy: Mail Today