The country’s largest producer of passenger cars, Maruti Suzuki India, whose chairman RC Bhargava is, has stated that the tax system in the auto industry has to be rationalised.
Cars have always been subject to higher taxes than the majority of other goods. With a 50% tax rate, an industry cannot expand (including cess). Nowhere in the world has it occurred, he claimed. “Even in wealthier nations, where cars are far more accessible to the populace due to high per capita incomes, car taxes are significantly lower. For instance, it is roughly 19% in the EU and 10% in Japan. The rate of taxation on most other goods in those nations is pretty similar to that on automobiles, Bhargava continued.
Speaking late on Monday at the company’s annual media event, he said that tiny cars have the most regulatory load and that a consistent tax system across all vehicle classes would not bode well for the sector’s expansion.
He claimed that the government should consider whether to tax cars more heavily than the average rate. If the answer is yes, he continued, “then we are in a sense adopting the idea that vehicles or luxury goods should be subject to higher taxes than non-luxury goods, which is the traditional socialist way of thinking and taxation.”
He emphasised that the affordability issue has been a growing hindrance for the auto sector for a number of years, and the growth pace is just slowing down. According to Bhargava, the country’s car industry’s growth has slowed to 3% from 12% over the previous 12 years. “Car penetration data indicates that we are increasing it by 1 point year. Around 30 automobiles per 1,000 people are present. Over the past five years, it has increased by one person annually. It will take us 140 years to reach China’s level, which is currently 170 (vehicle) per 1,000 people, he said.
He contends that the auto industry has served as the foundation for the advancement of manufacturing in other nations, and that the government should make an informed choice on automobile taxes.
Currently, there is a 28% GST on cars, plus an additional cess that varies by vehicle type and ranges from 1% to 22%. Customs duties on vehicles imported as completely built units (CBUs) range from 60% to 100%, depending on the cost and size of the engine, as well as if the value of the insurance and freight (CIF) is less than or greater than $40,000.
Regarding free trade agreements (FTAs) in the auto sector, Bhargava claimed that India has the capacity to be significantly more competitive than any other country in manufacturing. “Competition from other sources is not the least bit of a problem for me. I believe that we can tolerate some quantities even if they are discarded. Personally, I think India should aggressively pursue tariff reduction and FTA entry at the same time, and we should take all necessary steps to increase the competitiveness of our industrial industry. FTAs provide us access to a lot of new markets, and we can compete without resorting to dumping by offering high-quality, reasonably priced vehicles all over the world, the official said.
Bhargava claimed that although if the economy of the nation is performing well and that growth rates will be close to 7%, they would be higher if manufacturing could expand more quickly. “Unfortunately, India’s manufacturing sector is still lagging behind. Many reforms and adjustments have taken place, but for some reason, we are still unable to advance as much as we could,” he remarked. According to Bhargava, there is a disconnect between the goals of policy and the effectiveness of its implementation. “It is preferable even if your policy is not the best as long as it is fully and accurately enforced. If a policy is not executed correctly, it can go from being good to awful, and if it is implemented correctly, it can go from being mediocre to good. And I believe that the implementational machinery is where we have been lacking all these years, he continued, stressing the fact that there is still work to be done.
- According to RC Bhargava, high car taxes need to be reconsidered
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