30% excise duty on SUVs lacks rationale: Pawan Goenka

Seeing no rationale behind the government's move to hike excise duty on Sports Utility Vehicles (SUVs) to 30%, Pawan Goenka, President Automotive Sector, M&M told ET Now that the decision will distort the playing field in auto industry.

"The tax is not only putting an extra burden on the industry but it also is distorting the playing field because certain vehicles in the same price range will bear the 3% extra duty and others will not," Goenka said.

"Some SUVs are taxed, some are not. It is becoming very arbitrary and is creating a distortion in the industry, which is not desirable," he opined. "It is being said that because SUVs run on diesel, they are being taxed extra. If that is the case then one should take the bull by the horn and tax all diesel vehicles," he added.

The Parliament on Tuesday passed the Finance Bill which contained a clause that hikes the excise duty on diesel SUVs from 27% to 30%. The proposal was first announced by Finance Minister P Chidambaram in his Union Budget 2013 speech.

Commenting on the move, Chidambaram said that 98% SUVs run on diesel and the 3% hike is a 'very small' increase. "Since diesel is a subsidised fuel, the extra duty will help in partial recovery of losses," he said. "We are only partially recovering the losses from the rich people who use SUVs," he added.

The 30% excise duty is applicable on SUVs that are 4 metre or above in length. SUVs with 170 mm ground clearance are also eligible for the excise duty. 

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