'Reducing taxes on automobiles can boost sector, benefit economy'

NEW DELHI: A roadmap to reduce taxes on automobiles by half over a 10-year period to make the Indian auto industry more competitive globally and provide large scale employment to benefit the economy needs consideration, as per Vikram Kirloskar, VC, Toyota Kirloskar Motor.

Although at the moment India cannot afford to slash the tax rate on automobiles drastically, he said a plan to reduce cess on the industry can be looked at considering the sector’s contribution to the overall GDP of the country.

“The auto industry is highly taxed. If we look at a car by the time it’s produced and by the time it’s sold, in most cases it is 30 to 50 per cent more than the ex-factory prices (after adding) GST and all the other taxes, including road taxes,” he said.

He further said, “We as an industry are very competitive. I think in the world, cost wise, quality wise, we have become quite competitive. So I think a plan to reduce taxes over a period of time will really benefit the industry.”

Over a 10-year period, he further said, “Can you reduce it by half?…is it possible to do a long-term plan on how to reduce the taxation in the auto industry to make it grow pretty large, which will make it even more competitive for domestic and for export and provide large scale employment and benefit the economy?”

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

Kirloskar stressed such a step to reduce the taxes gradually would also benefit the country in terms of employment and boosting economic growth.

The car industry is a huge source of employment generation — all the way from steel making to cast iron making, raw materials and dealerships, he said, adding, “It’s a big part of the economy, 7-8 per cent of GDP.” However, he acknowledged a drastic cut in taxes on automobiles at the moment is not a feasible idea.

“We can’t afford to as a country…I’ve never asked for a GST reduction. I’m just saying because is it possible to have a long-term plan and how to reduce the taxation in the auto industry to make it grow pretty large, which will make it even more competitive for domestic and for export and provide large scale employment and benefit the economy?” Kirloskar added.

On demands from a section of the auto industry to reduce customs duty on imported electric vehicles to spur electrification of automobiles in India, he said, “Why can’t you make it here?” Kirloskar said companies need to develop supply chains here in India to enhance localisation.