TaxTMI 
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TaxTMI 
Effective Rate / Exemption
The exemption from levy of infrastructure cess has been notified at different rates (includes exemptions) vide Notification No. 1/2016-Infrastructure Cess dated 01.03.2016 and has come into force from 01.03.2016 itself. In the following table, effective cess rates are given after exemption as per Notification No. 1/2016-IC dated 01.03.2016.
Table
Sl. | Heading | Description of excisable goods | Rate | |
No. | ||||
(1) | (2) | (3) | (4) | |
1 | 8703 | Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles | Nil | |
2. | 8703 | Motor vehicles (other than three wheeled motor vehicles for transport of upto seven persons), which after clearance has been registered for use solely as ambulance | Nil | |
3. | 8703 | Motor vehicles (other than three wheeled motor vehicles), which after clearance has been registered for use solely as taxi | Nil | |
4. | 8703 | Electrically operated vehicles, including three wheeled electric motor vehicles Explanation.- For the purpose of this entry, 'electrically operated vehicles' mean vehicles which are run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles and shall include electric motor -assisted cycle rickshaws driven by rechargeable solar batteries, also known as 'soleckshaw' | Nil | |
5. | 8703 | Hybrid motor vehicles Explanation. - For the purpose of this entry, 'hybrid motor vehicle' means a motor vehicle, which uses a combination of battery powered electric motor and an internal combustion engine to power the vehicle to drive trains, but does not include such micro -hybrid motor vehicle with start and stop technology, using battery powered electric motor only while in static condition | Nil | |
6. | 8703 | Three wheeled vehicles | Nil | |
7. | 8703 | Cars for physically handicapped persons | Nil | |
8. | 8703 | Hydrogen vehicles based on fuel cell technology Explanation.- For the purpose of this entry, 'Hydrogen vehicle' means a motor vehicle that converts the chemical energy of hydrogen to mechanical energy by reacting hydrogen with oxygen in a fuel cell to run electric motor to power the vehicle drive trains | Nil | |
9. | 8703 | Motor vehicles of length not exceeding 4000 mm, namely petrol, liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven vehicles of engine capacity not exceeding 1200 cc Explanation. -For the purpose of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under | 1% | |
10 | 8703 | Motor vehicles of length not exceeding 4000 mm, namely diesel driven vehicles of engine capacity not exceeding 1500 cc Explanation.- For the purpose of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under | 2.5% | |
11 | 8703 | Other higher engine capacity and SUV's and bigger sedans | 4% | |
It may be noted that for item No. (2) and (3) in above table, following conditions should be satisfied –
- The manufacturer pays the Infrastructure Cess at the rate specified under the Eleventh Schedule of the Finance Bill, 2016 read with exemption contained in any notification of the Government of India in the Ministry of Finance (Department of Revenue), at the time of clearance of the vehicle;
- The manufacturer takes credit of the amount equal to the amount of Infrastructure Cess paid in excess of that specified under this exemption, in the Account Current, maintained in terms of Part V of the Excise Manual of Supplementary Instructions issued by the Central Board of Excise and Customs and thereafter files a claim for refund of the said amount of Infrastructure Cess before the expiry of six months from the date of payment of duty on the said motor vehicle, with the Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, having jurisdiction, along with the following documents, namely:-
(3) a copy of the document evidencing the payment of Infrastructure Cess,
- Infrastructure Cess, in excess of the Infrastructure Cess payable under this exemption from the buyer, an evidence to the effect that the said amount has been duly returned to the buyer; and
For three wheeled vehicles as per S.No. 7 of above table, following condition is to be met.
If,- .
(i) an officer not below the rank of Deputy Secretary to the Government of India in the Department of Heavy Industries certifies that the said goods are capable of being used by the physically handicapped persons; and
(ii) the buyer of the car gives an affidavit that he shall not dispose of the car for a period of five years after its purchase.
Nature of Cess and Objective
According to provisions, infrastructure cess shall be collected for the purpose of Union as an excise duty for the purpose of financing infrastructure projects. This cess shall be in addition to any other duties of excise chargeable on such goods under Central Excise or any other law and the applicable provisions relating to Central Excise and rules made shall apply to infrastructure cess. The proceeds of infrastructure cess shall be meant for Union and shall not be distributed among States.
Impact
The levy of infrastructure cess is likely to impact automobile sector, more particularly motor vehicles and SUV's segment which will result in price hike and likely resultant sales slow-down which has already crept in due to weaker demand in economy. It may be noted that most of the manufactures had enhanced their prices in the beginning of the year without factoring any such cess. The burden of cess will be of course, passed on to the customers only.
Since infrastructure cess is non-cenvatable, it is payable in cash and will add to cost or MRP as the manufactures will load it on to the buyers of vehicles. The cess is also not meant for states and shall be available for use only by the centre for the specified objectives.
However, it is not understood that how the small amount of ₹ 3000 crore to be collected from infrastructure cess is going to help the centre for creation of infrastructure where huge amount is required. ₹ 3000 crore may just not even be tip of the iceberg so far as infra-financing is required. It would have been better to hike excise duty of 50 basis points on all vehicles with allowance for cenvat credit.
(Concluded)
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