Budget 2016: Cars and SUVs to Become Expensive

Announcing the budget Arun Jaitley said "1% additional tax will be charged on luxury cars above Rs. 10 lakh". Furthermore he also mentioned that a 1 per cent infrastructure cess will be levied on small petrol cars, while a similar 2.5 per cent cess will be imposed on diesel cars. This move is believed to be aimed at keeping pollution in check and at the same time promote the use of hybrid cars in India. We say this because in the new budget, the government will continue to offer exemption on environment vehicles like electric and hybrid cars and parts that are set to expire on March 31, 2016.

Also Read: SUVs in India Under Rs. 15 Lakh

This decision is surely going to make a huge impact on carmakers manufacturing vehicles with diesel engine, especially when you consider over 40 per cent of passenger vehicles sold in India run on that fuel. Commenting on these decisions, CRISIL says that, "The additional 2.5-3.5% cess will further pull down demand for diesel cars & SUVs.

Apart from the aforementioned categories, prices of utility vehicles and luxury cars are set to go up after Jaitley proposed a 1 per cent cess on LPG, CNG and other cars. The increase in levy is sure to create more tension among SUVs and Luxury car manufacturers who are already facing a ban on registration of diesel vehicles with engines of 2000 cc and above in the National Capital Region till March 31, 2016 from the Supreme Court.

But there is some good news too. Considering the budget is touted to be pro-poor, three wheeled vehicles, electrically operated vehicles, hybrid vehicles, hydrogen vehicles based on fuel cell technology, motor vehicles which after clearance have been registered for use solely as taxi, cars for physically handicapped persons and motor vehicles cleared as ambulances or registered for use solely as ambulance will be exempted from this cess.