The Delhi state government on Thursday proposed wide-ranging changes in the tax regime for diesel vehicles in its Budget for 2004-05.

To begin with, the sales tax on diesel was proposed to be raised from 12 per cent to 20 per cent. It also proposed to amend the Delhi Motor Vehicle Act in order to levy an additional 2 per cent road tax on private non-transport diesel vehicles.

The Budget also proposed to introduce an entry tax for all diesel vehicles coming in to Delhi. In addition, the Budget also proposed to change the road tax rates to 2 per cent for vehicles below Rs 400,000 and 4 per cent for vehicles above Rs 400,000.

The move is expected to impact the sale of diesel vehicles, especially multi-utility vehicles and sports utility vehicles in Delhi. However, it cannot be ascertained what will be the impact on the price of diesel.

Reacting to the proposals, Hyundai India President BVR Subbu said: "I have been a votary of such a decision for a long time. Now, there will be some parity in the tax paid for by the diesel and petrol car users. For instance, the average tax paid per kilometre for a two-wheeler owner is higher than that for a diesel luxury car owner."

Commenting on the proposal, the Society of Indian Automobile Manufacturers said it was discriminatory and not based on science.

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