Budget Expectations. Luxury car makers pitch for lower taxes, stable policy

Luxury car makers in India have urged the government to at least reduce the taxes on their products if not their complete abolition in the upcoming Budget, as the industry has seen a decline of more than 50 per cent in sales over the previous year.

Companies, including Mercedes-Benz India, BMW India Group and Audi India, said luxury cars are one of the highly taxed commodities and, therefore, requested the government to support the auto industry by reducing it in a phased manner.

The luxury vehicles in India attract a GST of up to 50 per cent, including the cess, and registration tax of another 15 per cent, which make them very expensive. And, if the vehicle is a completely built unit (CBU), it attracts an import duty of 100 per cent too.

Uniform tax regime

Vikram Pawah, President, BMW Group India

 

Therefore, with India becoming a hub of the automotive industry now, the country should have some uniform tax regime for the luxury vehicles, said the manufacturers.

“It is time that we as Indian community started experiencing the pleasure of the entire world...any distortion that is there currently, which is causing the demand to skew in one direction or the other, needs to be removed. I am not saying to eliminate them fully, but the current level at which it is taxed is probably not something that we should continue with,” Vikram Pawah, President, BMW Group India, told BusinessLine .

He said the auto industry contributes six-seven per cent to the GDP, so any stimulus that can be provided to revive this industry to bounce back stronger will help right now, especially when the industry is coming back from the pandemic.

“We are expanding every year, investing in India, making in India, and we do expect that the policy should now be somehow harmonised to give a little level playing field,” he added.

Stable policy

Balbir Singh Dhillon, Head of Audi India, echoed the same views and asked for a stable policy regime for an uninterrupted business due to long lead times, which is specific to the luxury automotive industry.

“Burdened under high duties, GST, cess and registration costs, we urge the government to rationalise the whole tax structure, which eventually will lead to higher volumes and revenues for the State. Luxury car sales contribute to under one per cent of the overall passenger vehicle sales in India, which is far below the levels in most comparable economies,” he said.

He said 2020 was a tumultuous year and like many sectors, the Indian automotive industry was also badly hit by the Covid-19 pandemic, with April being an unfathomable month of zero sale. The luxury automotive industry faced even stronger headwinds and sales plummeted to a 10-year low.

“While there has been a partial recovery during the last few months, we anticipate strong support from the government to bolster growth in this segment,” Dhillon added.

Martin Schwenk, Managing Director and Chief Executive Officer, Mercedes-Benz India, said this high tax regime is keeping a large section of potential customers away from the segment and therefore, “would request the government to support the auto industry by reducing it in a phased manner and finally abolishing it completely.”

The Indian luxury car market is mainly represented by companies including Mercedes-Benz, Audi, BMW, Jaguar Land Rover and Volvo have sold around 21,400 units in 2020, which 37 per cent decline as compared to around 34,000 units in 2019. It was lowest since 2010 when the industry sold around 15,280 vehicles.

COMMENT NOW