Excise duty is levied on cars at the time of manufacturing. It differs according to the models and specifications of the cars. There are also specific conditions for the levy of excise duty on cars.
Note: Excise duty has been replaced by the Goods and Services Tax.
Excise duty on car is levied at the time of manufacturing a car in India. Cars of different models and make are eligible for excise duty tax.
Listed below are some of the conditions that needs to be fulfilled if excise duty tax is to be charged on the car.
- There should be a manufacture
- The manufacture should be in India excluding special economic zone
- The manufacturer should produce the cars
- The cars manufactured should be specified in central excise tariff act
The Central Board of Excise and Custom is responsible for administering excise duty tax.
Excise Duty on Cars – Rates for Different Models
One of the main conditions that determine the excise duty levied on a car is its size. For cars that are less than or equal to 4 metres in length, the excise duty levied is 8%. The excise duty levied on cars with a length of more than 4 metres is 20%. Given below is the excise duty on cars for the year 2015 and the rates applicable for different models.
| Condition 1 | Car of less than 4 metres in length | Cars of more than 4 metres in length | ||
| Condition 2 |
For petrol cars below 1200 cc and for diesel cars below 1500 cc |
For petrol cars below 1200 cc and for diesel cars below 1500 cc |
For petrol cars below 1200 cc and for diesel cars below 1500 cc |
For petrol cars below 1200 cc and for diesel cars below 1500 cc |
| Example of the cars | Maruti, Alto, Hyundai i10, etc | Honda city, Hyundai accent, etc | Honda Accord, Hyundai Sonata, etc | Toyota Fortuner, Ford Endeavour, Toyota Innova, etc |
| Excise duty on these cars | 8% | 20% | 24% | 24% |
| Applicable from | From budget 2012 | From budget 2012 | From budget 2012 | From budget 2013 |
How Excise Duty impacts your Car Purchase?
Excise duty on a car can be a major factor when it comes to purchasing a car. A heavy excise duty tax on your car will mean the customer has to shell out more for the car. Bigger the car, higher the excise duty tax on the car. Let’s consider a customer who is trying to make a choice between two cars, a Honda City and a Honda Accord, the excise duty on the cars differ owing to the difference in their length. If the customer is looking for an economical option then they will go for the Honda city as it is much less expensive. The excise duty tax plays a role in deciding the price of the car. Many companies have resorted to reducing the length of their cars to less than 4 metres to avail the excise duty benefit on smaller cars below the length of 4 metres.
Date since which new Excise Duty on Cars was Implemented
Central excise duty tax is revised along with the budget every year but there necessarily doesn’t have to be a change in the rate every year. The excise duty on cars was revised last in the year 2013.
New Excise Duty on Large Cars
The excise duty tax levied on large cars is different than the excise duty tax levied on smaller cars as they vary in length. By definition, SUV are cars that are more than 4 metres in length and fall under the large vehicles category but some sedans fell into the same category. To prevent sedans from falling into the same category the government instructed that the excise duty levied on them should be as on mid sized cars. The excise duty levied on large cars is much higher and the rates might be hiked in the future.
Given below is a list of other vehicles along with the excise duty tax charged on them:
| Vehicle | Excise Duty Levied |
| Ambulance | 12% |
| Two or three wheel electric motor vehicles | 6% |
| Hybrid vehicles | 12% |
| Three wheel vehicles | 12% |
