Toyota, Maruti among many to highlight pain of high taxes in auto sector

The chorus around the tax structure on cars and bikes became louder early Tuesday when Toyota pointed out that it was the primary reason why it has decided to halt its expansion plans in the country. At a time when the auto industry here is looking to pick itself up from a challenging 2019 and a chaotic 2020 so far, calls for tax rationalisation have begun to reverberate.

In an interview to Bloomberg, Toyota Kirloskar Motor vice chairman Shekar Viswanathan elaborated on why and how high levies impact the industry. "The message we are getting, after we have come here and invested money, is that we don’t want you," he said, adding that in the absence of reforms, Toyota Kirloskar Motor 'won't exit India but we won't scale up.'

Viswanathan also mentioned how such high levies put cars out of reach of consumers which result in factories being idled and jobs aren't created. Highlighting the high taxes imposed on vehicles, he felt these are punitive in nature. "You’d think the auto sector is making drugs or liquor." (Read full report here)

Pune-based Force Motors had already pointed out the high taxes as being restrictive, earlier this month. It had called for a very detailed and thorough reform while shedding light on high taxes and high interest rates as two factors hindering growth and profitability in the automotive industry. (Read full report here)

Maruti Suzuki India Chairman RC Bhargava too had pointed how India is placed vis-a-vis other countries in terms of tax on the auto industry. "Even before 2019-20, the tax on cars in India was far higher than in any other car manufacturing country in the world. In the European Union (EU), the VAT is 19 per cent and no other taxes. In Japan, taxes are around 10 per cent," he had said. (Read full report here)

Automotive Component Manufacturers Association of India (ACMA) had also called for a tax rationalisation to tide over the current crisis. The industry, which provides employment to over 50 lakh people in the country, has sought GST reduction on auto components as well as vehicles in order to revive the overall automobile industry. (Read full report here)

Finance Minister Nirmala Sitharaman has already said that two-wheelers merit a reduction in GST rates which are presently in the 28 per cent bracket currently. This has given a glimmer of hope to the automotive industry at large although it is yet to be realised.

Whether the calls for a tax revision or restructuring does indeed come about or not is not certain but what is certain though is OEMs gradually making their reservations known as they wade through uncertain times.