Will FinMin exempt low-cost SUVs from excise hike?

In what could be a possible relief for the auto sector, the finance ministry may review its decision to hike excise duty on low-cost SUVs, as Minister of Heavy Industries Praful Patel has sought exemption for vehicles costing below Rs 10 lakh, after the auto industry reported the worst monthly sales figures in a decade.

In his budget speech, Chidambaram justified the increased tax for SUVs, saying: "SUVs occupy greater road and parking space. Reuters[/caption]

SUVs have been the one category to buck this downward trend and reported a 55 percent growth between April and February compared with the same period a year earlier. Also, sub-R10 lakh SUVs account for 85% of sales in the segment, with demand growing in both rural and urban markets.

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The matter is expected to be reviewed when Parliament discuss the Finance Bill for 2013-2014, CNBC-TV 18 reported today.

If Finance Minister P Chidambaram does go ahead with the exemption, M&M's Bolero, Tata Sumo & GM's Tavera stand to gain.

The budget for the coming financial year proposed a hike in the duty paid by the manufacturers of the vehicles to 30 percent from 27 percent, and did not include a reduction in excise on small cars, as the industry had hoped.

In his budget speech, Chidambaram justified the increased tax for SUVs, saying: "SUVs occupy greater road and parking space."

Chidambaram had also proposed an increase in import tax on luxury vehicles to 100 percent from 75 percent, and on motorcycles with engine capacity above 800cc to 75 percent from 60 percent.

Heavy Industries Ministry sources told the channel that they are yet to receive a response from the finance minister.