Taxes on Cars Can Be Brought Down

Auto industry body SIAM or Society of Indian Automobile Manufacturers president and Toyota Kirloskar vice-chairman Vikram Kirloskar believes the taxes on automobiles in India are quite high and need to be brought down in order to give a thrust to the industry, which has been battling slowdown.

"If you look at the duty structure the taxes that we pay on a car when you buy it- if you pay Rs 100 for the car almost Rs 50-60 is taxation, so there is a case to actually reduce the duty structure," Mr Kirloskar told NDTV.

In order to encourage manufacturing and make Prime Minister Narendra Modi's ambitious "Make in India" vison a reality, the auto sector needs an impetus from the government, he said.

The auto industry accounts for 45 per cent of India's manufacturing, Mr Kirloskar added.

"If I look at the overall picture and especially look at this 'Make in India' target or projection of the government that we must increase manufacturing in India... In four-wheelers there is a bout a 40 per cent excess capacity available in the market and filling this up is relatively easy, it is a low-hanging fruit," he said. (Watch: Video)

If Finance Minister Arun Jaitley does decide to cut excise duty on automobiles later this month in the Budget, auto sales could see a 7-8 per cent growth during the calendar year ending December 2015, he said.

Otherwise it would see an on-year growth of around 3 per cent, if duties remain the same, said Mr Kirloskar.
In the interim Budget last February, the previous UPA government had cut excise duty on cars, SUVs (sports utility vehicles), two-wheelers and consumer durables in order to boost the two sectors that were seen struggling.

Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced to 8 per cent from 12 per cent previously. For SUVs, it was cut to 24 per cent from 30 per cent; for mid-sized cars, to 20 per cent from 24 per cent and to 24 per cent for large cars from 27 per cent.

For the consumer durables sector the excise duty was reduced to 10 per cent from 12 per cent.

In June, the new government led by Mr Modi extended the excise duty concessions by six months to December 31, 2014. The auto industry wanted further extension of the duty relaxation, but the NDA government decided against it.

Subsequently, with excise duty back to pre-February 2014 levels, auto manufacturers hiked prices of vehicles.
The industry body also hopes the government will give the industry an incentive in the form of taking off old cars form the roads.

"We are looking for some kind of incentives to remove old cars and vehicles off the road, this will not only help in propping up demand but more importantly it will help in safety, as well as it will help in emissions," Mr Kirloskar said.


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