Union Budget 2016 – 17: Passenger vehicles to get more expensive

Union Budget 2016 – 2017 will make passenger cars more expensive with the incorporation of a new infrastructure tax for all new cars while cars worth over Rs. 10 lakh will be charged an additional 1 per cent tax

The Union Budget for the 2016 – 2017 Financial Year has just been announced and it has turned out to be a heavy one for the automobile industry in India as additional taxes have been announced for cars across the board which will make them more expensive to buy in the coming fiscal year. This is done by levying an additional infrastructure cess on all new cars.

Without further ado, let’s understand how this additional infrastructure cess applicable on passenger cars will impact new passenger vehicle prices.

1. Small cars fueled by petrol, CNG or LPG with an engine capacity of less than 1,200cc and having a length of less than four meters will be charged with an additional 1 per cent tax in the form of the new infrastructure cess.
2. The infrastructure cess goes up to 2.5 per cent to be charged on diesel cars with an engine capacity of under 1,500cc and again being less than four meters in end-to-end length.
3. Infrastructure cess then shoots up to 4 per cent applicable on cars longer than four meters in length with bigger engines.
4. But that’s not all as an additional 1 per cent tax will be levied on cars that retail at over Rs. 10 lakh.

The Union Budget 2016 – 2017 exempts all hybrid cars, electric cars, hydrogen cars and three wheelers from the additional taxes applicable to internal combustion engined cars.

Off late there has been a lot of buzz about the rising air pollution levels in the country, although a lot of it has to do with various sources of pollution not related to automobiles. Nevertheless, the recent temporary ban on large capacity diesel cars was the start of penalizing automobiles in the bid to reduce air pollution. This has gone on to become a debatable issue as major causes of air pollution are actually not related to passenger cars as such. Nevertheless, these are steps towards deterring new car purchases leading to lower vehicular emissions.

The good news is that the Finance Minister stated that the process of road construction has been sped up to allocate a sum of Rs 55,000 crore in the budget for roads and highways. In addition the road sector will get Rs. 15,000 crores to increase national highways by nearly 10,000 kilometers.

Also read: Big diesel cars banned in Delhi