India Should Review Auto Taxes: Bhargava

India needs to re-examine the tax structure on automobiles which stands highest even among partly-developed nations in the world- if the industry is to attract new buyers and grow in a sustained manner, said RC Bhargava, chair- man of Maruti Suzuki.

While the industry has grown in strong double-digits this year, demand is coming from the more premium end of the market, indicating stress on affordability at the entry- level, head of the country’s largest carmaker pointed out.

Several policy measures pertaining to enhanced safety and emission norms implemented in last three years have resulted in an increase in vehicle prices. The burden of regulatory changes on small cars is higher than that on bigger vehicles and that is changing the whole market behaviour, Bhargava said at amedia interaction on Monday evening.

“People who are buying small cars are not buying small cars in near the same numbers,” he said. “Personally, I think it’s not a good thing, either for the car industry or the country. We need to add new buyers in a steady manner for the auto industry to grow sustainably. The base of ownership of cars must increase every year. Only then, when the whole pyramid becomes a larger one, will it be able to balance itself.”

The skewed growth rates being registered across segments will not warrant a uniform tax rate across smaller and larger vehicles in the Indian market, said. “I don’t see it as becoming an inverted pyramid. That the car industry becomes an industry in India where there is hardly any growth in the small segment and all the growth takes place in the higher segments,” he said.

“So, that factor has to be kept in mind, the regulatory effect on the car, and that’s one argument for not having a uniform rate of tax on all small and big cars.”

At present, automobiles are taxed at 28% GST with additional cess ranging from 1-22% depending on the type of vehicle. Cars imported as completely built units (CBU) attract customs duty ranging between 60-100% depending on engine size and cost, insurance and freight value being less or above $40,000.

Electric vehicles, however, at- tract a uniform GST rate of 5%, irrespective of the body style. “There’s no differential tax rate there. So, there already that uniform taxation happening,” Bhargava said. S-ET

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