Buying a Car or Even an Air Ticket Will Become Costlier

Excise duty on ATF to be hiked to 14 percent while ‘infrastructure cess’ of up to 4 percent will be levied on cars.

Fliers will soon have to shell out more, with the government proposing a hike of 6 percent in excise duty on jet fuel. The excise duty on Aviation Turbine Fuel (ATF) is to be hiked to 14 percent from 8 percent, according to a proposal in the Union Budget 2016-17.

But the excise would not be applicable to the proposed Scheduled Commuter Airlines (SCAs) under the regional connectivity scheme. The increase will, however, be virtually applicable to airlines operating from all airports since the proposal for SCAs and the regional connectivity scheme are yet to be implemented.

The Civil Aviation Ministry has mooted the idea of SCAs and regional connectivity in the draft aviation policy which has not been finalised yet.

Interestingly, the hike in excise duty also comes at a time when airlines have been seeking lower a levy on jet fuel, which accounts for more than 40 percent of their total operating expenses.

Increase in excise duty on ATF will make the raw material costlier by around 4-5 per cent. At a time when ATF in India is 60-70 per cent costlier than global ATF prices, it goes against the government’s stated objective to make flying affordable for the masses.

Amber Dubey, Partner and Head of Aerospace and Defence, KPMG

Adding more salt to the wound car prices are also set to go up, ranging from Rs 2,000 on mass market vehicles to over Rs 1 lakh on big diesel SUVs and sedans as Finance Minister Arun Jaitley decided to levy ‘infrastructure cess’ of up to 4 percent.

This move has certainly left major industry players fuming.

Singling out diesel vehicles in the aftermath of pollution problems in the Capital, Jaitley decided to impose 2.5 per cent cess on diesel vehicles of length not exceeding 4 meter and engine capacity not exceeding 1,500cc.

Engines with higher capacity and SUVs and bigger sedans were slapped a cess of 4 percent on the value of the car. There is over and above a cess of 1 percent on petrol/ LPG/CNG driven vehicles of length not exceeding 4 metera and engine capacity not exceeding 1,200cc.

Arun Jaitley also proposed “to collect tax at source at the rate of 1 percent on purchase of luxury cars exceeding value of Rs 10 lakh”. Hyundai Motor India Ltd (HMIL) Senior Vice-President (Marketing and Sales) Rakesh Srivastava said the infrastructure cess has come as a “dampener” for the auto industry.

When asked by how much the company’s vehicle prices will go up, he said it would range from Rs 3,000 on entry-level small car Eon to Rs 80,000 on SUV SantaFe, which are currently priced ranging from Rs 3.20 lakh to Rs 30.79 lakh (ex-showroom Delhi).