The cancellation of 120,000 car reservations in the scheme would terminate these potential purchasers' rights to obtain up to 100,000 baht each in excise tax rebates, said Somchai Pulsawas, the department's director-general.
Even though the cabinet resolution concerning the first-time car buyer scheme did not set a deadline for car delivery, sufficient time has passed for delivery and the department needs to close its tax rebate accounts, he said.
The first-time car buyer scheme was initiated by the Yingluck Shinawatra administration as part of the Pheu Thai Party's populist campaign promises during the 2011 general election.
The cabinet allowed first-time car purchasers who reserved passenger cars with a maximum engine size of 1,500cc and pick-up trucks priced less than 1 million baht before the end of 2012 to receive up to a 100,000 baht excise tax rebate when owners kept these cars for one year.
Car owners are prohibited from disposing of the cars within five years after delivery.
The programme was extremely popular as 1.25 million car buyers applied for the tax rebate. However, academics and economists lashed out, saying the scheme triggered a sharp increase in the country's household debt. The scheme was also credited with distorting the car market by stealing future demand and creating artificial demand.
Household debt crept up to 80.1% of GDP in the third quarter of 2013, from 79.2% in the second quarter and 56% in 2008.
Mr Somchai said the department will allow a few more months before encouraging dealers to cancel the reservations of those whose cars have not been delivered.
Some 20,000 of the remaining 120,000 car buyers are expected to take delivery, he said. About 845,000 car owners already received the tax rebate for a combined amount of 60.3 billion baht.