The Goods and Services Tax (GST) rates on automobiles are less than what VAT and excise duty rates used to be in pre-GST times and there has been complete certainty as such in auto sector taxation in India, according to the Finance Ministry.

Also, the most established players of the auto sector have been in India for quite some time and are used to the regulatory and taxation environment, an official in the Ministry said, adding that it is evident from the huge payouts in the form of royalty made by these auto companies to their parent companies located abroad.

In fact, certain concessions have been provided to electric vehicles and hybrid vehicles. The official’s comment becomes significant following dissent being expressed in certain sections on high taxation in the auto sector causing a demand slump and difficulty in scaling up for auto players. In fact, pressure is being put on the matter to be taken up at the next GST Council meeting to be held on October 5.

Companies such as Maruti Suzuki India, Mahindra & Mahindra, Toyota Kirloskar Motor India and Hero MotoCorp have been saying that reduction in GST would help the sector. Industry bodies SIAM and Auto Component Manufacturers Association (ACMA), representing the industry, have been also vocal about it.

Cut costs

“India’s tax policy on automobiles has been quite consistent for the last three decades now in the form of allowing foreign investment and incentivising domestic manufacturing by providing reasonable protection from imports. The industry has, on its part, delivered. It has contributed by way of large investments and employment. All of a sudden, dissent in some quarters on tax rates on automobiles is surprising,” the official said.

In fact, these companies should reduce their costs of manufacturing by cutting down the royalty payments to their parent companies abroad instead of asking the government to reduce GST, the official added.

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