M&M considers modifying SUVs to avoid additional excise duty

May 3, 2013: The 3 percent additional excise duty, after the Union Budget 2013-14, seems to have had a negative impact on the SUV market in India. According to Mahindra & Mahindra, the sales of SUVs which attract the additional 3 percent excise duty have dropped by 14 percent in April 2013, as compared to April 2012.

“This is contrary to the 24 percent growth witnessed in April 2012. The increase of 3 percent excise has resulted in the decline, instead of growth in a segment which was the fastest growing till recently. Clearly, this is a big dampener and it has also affected the overall industry sales,” said Dr Pawan Goenka, president, automotive and farm equipment sectors, M&M (pictured). He also stated that the increased excise duty will compel M&M to consider modifying its products to align with the new specifications for lower excise duty. Currently, SUVs that have an engine of 1500cc or above, a minimum ground clearance of 170mm and a length of 4 metres or more attract 30 percent excise duty, instead of 27 percent earlier.

Mahindra & Mahindra has expressed disappointment over the non-reconsideration of the additional 3 percent excise duty on SUVs proposed earlier this year in Union Budget 2013-14. The company, which is India’s largest SUV manufacturer, had previously expressed concerns that in the current economic environment, any additional duties levied by the government will be counterproductive from a revenue generation viewpoint. It had hoped that the representations made by the Society of Indian Automotive Manufacturers (SIAM) and other automotive companies would make the government reconsider the additional excise duty on SUVs.

Speaking on the issue, Dr Goenka said: “While the tax in itself is a concern, we are perplexed about the criterion and justification of this additional duty. The hike in excise has also resulted in a situation where there is no level playing field between players in the industry as some of the best-selling SUV models competing in the same price bracket do not come under the increased duty structure due to the specifications in the new definition of SUVs.”