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File photo used for representational purpose.
File photo used for representational purpose.

Buying a car may become cheaper soon as lower taxes a possibility

  • India is one of the world's largest automobile markets but the vehicle penetration per 100 people is still nowhere close to what is in the western world and in China.

  • Affordability is considered one of the major stumbling blocks when it comes to purchase of vehicles.

The Indian automobile industry's long-standing request for lower taxes for more affordable automobiles could soon be considered by the Union government. This after the country's revenue secretary recently said he is ready to engage in discussions over goods and services tax (GST) rates and see what ‘tinkering’ with it may lead to.

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The current GST rate on vehicles like cars, motorcycles and trucks are as high as 28%. When numerous state taxes are added to this, the final price tends to make these vehicles expensive, in comparative terms. Lower taxes have, therefore, been a request from the automobile industry for quite some time and it is believed that such a step could bolster demand and therefore sales.

Revenue Secretary Tarun Bajaj, speaking at a Society of Indian Automobile Manufacturers seminar recently, hinted the government may be open to the possibility of lowering taxes. "I would be very happy to engage with you to see what we can do even on (GST) tax rates, what is the tinkering we can do to see to it that certain (vehicle) segments get the encouragement they deserve," he said.

India is one of the world's largest automobile markets but the vehicle penetration per 100 people is still nowhere close to what is in the western world and in China. China is the world's largest automobile market - both in terms of sales and manufacturing.

One of the main reasons for India's 'low' vehicle sales, as cited by the automobile industry here, is the affordability factor. At a time when rising input costs and the need to make safer vehicles which also meet stringent emission norms may be driving up manufacturing costs, a lowering of taxes could be a shot in the arm - not just for OEMs but for customers as well. And many believe that such a measure could indeed jump start the rather jittery sales which has been prevalent since around 2018-2019.

(With input from Reuters)

  • First Published Date : 26 Aug 2021, 09:48 AM IST