“Over 45% of the price of a car goes to the government in taxes” – The New Indian Express
Express news service
Hard hit by the Covid-19 pandemic, auto sales in India are expected to decline sharply in fiscal year 21. Luxury car sales, which only account for one percent of total car sales , could be hit harder, as its target customers are in caution mode. On Monday, Balbir Singh Dhillon, Head of Audi India and Manohar Bhat, Head of Sales and Marketing, Kia Motors India spoke about the impact of Covid-19 on the industry, high taxes, government relief, between others, in a chat with author and senior journalist Kaveree Bamzai and Prabhu Chawla, editorial director of New Indian Express as part of TNIE’s Express Expressions, a series of live webcasts with people who matter.
âA lot of the price customers pay when buying a luxury car goes towards import duties, registration tax and GST. We only represent one percent of total car sales volume, but we contribute almost 10 percent of total revenue, âDhillon said. Currently, import duties on competitor-built cars (CBUs) in India are between 60 and 100 percent.
Then the GST is between 40 and 50 percent, depending on the size and displacement of the car, and the registration taxes are between 10 and 20 percent. Let’s say if someone buys a car worth Rs 1 crore, he might end up paying taxes in the range of Rs 65-70 lakh. For locally produced products, you end up paying 20 lakhs in taxes for one unit at the price of Rs 50 lakh. âIf it’s not streamlined, we won’t grow. The problem is not only fiscal. It’s tax on tax, âDhillon said. He added that a high tax rate also impacts a company’s ability to export more from India.
âWe have treaties with many countries. The export is also subject to a certain taxation. These are taxes which are higher in India compared to many other countries. For example, Mexico’s export tax is lower than India’s export tax, âexplained the director of Audi India.
Korean automaker Kia Motors is however pleased with the response it has received so far in India. During his short one-year journey, he became a major player in the passenger vehicle segment with two big hits: Seltos and the recently launched Sonet.
âWe are confident about the mid-term estimate we had on the Indian market. The short term could have been better but we are not complaining. GDP is expected to decline this year and auto sales are closely linked to it. The bigger question is when will the industry return to 2018 levels, âBhat asked.
According to him, the government should consider stimulating demand in a more targeted manner. âA scrapping policy based on cash incentives and a tax rebate / break on the purchase of cars for a shorter duration can be helpful in improving sentiment,â he said.
Meanwhile, Dhillon said in the luxury segment, most buyers are businessmen, who have been badly affected by the Covid-induced lockdown, and now buying a car is not their first priority.