Country’s largest passenger vehicles maker, Maruti Suzuki India (MSIL), has said the government’s high tax regime is a critical factor for cars being unaffordable for the common people.

Policy makers and government treat cars as luxury items and that is why they are not affordable to a majority of the population, RC Bhargava, Chairman, MSIL said late on Monday night at an annual meet with mediapersons.

“You can’t grow an automobile industry with 50 per cent taxation. Where in the world has an industry like automobile grown with 50 per cent taxation? But, it’s the wisdom of the policymakers and the political leadership...all taxes on automobiles should be rationalised, just like rest of the world,” he said.

Bhargava said compared to developed markets like Europe and Japan, where taxes are low despite per capita income being far higher, taxes on cars in India are much higher.

Uniform tax regime

On asked about a uniform tax regime, he said that conditions are changed and there are different slabs in GST and ultimately if there is a single slab in GST then everything will fall in place.

“Electric cars today have one slab of taxation (5 per cent GST) – whether it is small or big electric there is already that kind of uniform taxation talk that is going on. The current situation is because of regulatory changes and the burden of regulatory changes on small cars is far higher than on big cars (internal combustion engine or hybrid),” he said.

He said this is the factor behind changed market behaviour which reflects in people, who were earlier buying small cars, not buying small cars anymore. “Neither of this is good for the healthy growth of the automobile industry...there should be a steady growth,” Bhargava added.

He said some of the decisions of the government are not correct. The expertise on civil services are required to paint the correct pictures to the policy makers, he said.

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

On free trade pacts

Asked about free trade agreement (FTA), especially India currently engaged in talks with the UK and EU, which may have a big bearing on the fortunes of the automotive industry, Bhargava said, “I believe we can compete not through the dumping route but by providing good quality/ highly competitive vehicles for many parts of the world.”

Stressing that these are his personal opinions, Bhargava said that India should aggressively go and reduce the tariffs and get into FTAs. “At the same time, we must do to make our industrial manufacturing much more competitive...I think our interest is best protected by subjecting ourselves to competition,” he added.