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The 2013 Union Budget had a nasty surprise in store for SUV makers in India when the new duty structure mandated that cars with engines bigger than 1.5 liters in capacity, length greater than 4 meters and with a ground clearance higher than 170mm stand to be classified as SUVs. Such cars also face a higher excise duty and this increase in excise duty has meant that SUVs and MUVs such as the Mahindra Bolero and the Tata Sumo, predominantly used in the taxi sector and for rural transport have become more pricier. This reason given by the Indian government for this excise duty hike is that SUVs/MUVs occupy more space on the road and hence cause more congestion. So, they need to be taxed higher, at 30%.
While the congestion bit does have some basis to it as SUVs/MUVs come with a larger footprint than say a compact car/hatchback, the whole idea of hiking excise duty on SUVs/MUVs just based on engine capacity, length and ground clearance might not actually lead to solving the problem of congestion. Far from it, there are much larger luxury cars that occupy a larger footprint than the SUVs/MUVs of this world which have not come under the new ambit of classifying SUVs just because they have a ground clearance measuring under 170mm. So, the new classification rules for SUVs smacks of a haziness that burdens the poor while letting the rich get away.
Mahindra, known primarily for its range of utility vehicles such as the Bolero, Scorpio and the XUV500, could work around government regulations by reducing the ground clearance of its SUVs to just under 170mm. Once that happens, the utility vehicles in Mahindra’s range might no longer be classified under the higher excise duty bracket. This circumvention means that the Indian government’s whole exercise of coming up with new classification rules for SUVs will fall flat on its head. The flawed classification approach for SUVs might have finally met its match. This information is courtesy the Facebook page of YoungTurks, which carried a briefing quoting Dr Pawan Goenka, Head-Automotive of Mahindra stating that,
Mahindra plans to rework ground clearance of SUVs to workaround the excise duty hike - Indian Cars Bikes : Indian Cars Bikes
While the congestion bit does have some basis to it as SUVs/MUVs come with a larger footprint than say a compact car/hatchback, the whole idea of hiking excise duty on SUVs/MUVs just based on engine capacity, length and ground clearance might not actually lead to solving the problem of congestion. Far from it, there are much larger luxury cars that occupy a larger footprint than the SUVs/MUVs of this world which have not come under the new ambit of classifying SUVs just because they have a ground clearance measuring under 170mm. So, the new classification rules for SUVs smacks of a haziness that burdens the poor while letting the rich get away.
Mahindra, known primarily for its range of utility vehicles such as the Bolero, Scorpio and the XUV500, could work around government regulations by reducing the ground clearance of its SUVs to just under 170mm. Once that happens, the utility vehicles in Mahindra’s range might no longer be classified under the higher excise duty bracket. This circumvention means that the Indian government’s whole exercise of coming up with new classification rules for SUVs will fall flat on its head. The flawed classification approach for SUVs might have finally met its match. This information is courtesy the Facebook page of YoungTurks, which carried a briefing quoting Dr Pawan Goenka, Head-Automotive of Mahindra stating that,
“Will re-define models to meet 170mm ground clearance”.