India is open to 'tinkering' tax rates on automobiles: Revenue secretary

| Updated: August 27, 2021 08:58:59

Vehicles are pictured at a toll post in Mumbai, India, August 13, 2019. REUTERS/Francis Mascarenhas Vehicles are pictured at a toll post in Mumbai, India, August 13, 2019. REUTERS/Francis Mascarenhas

India is open to discussing a change in tax rates on automobiles, the country's revenue secretary said on Wednesday, indicating receptiveness over negotiation on a long-standing request from automakers for lower taxes.

India's federal goods and services tax (GST) rate on automobiles, including cars, motorbikes and trucks, is as high as 28 per cent, on top of which other taxes are imposed by states.

Company executives say this is making vehicles unaffordable for many buyers, especially as high raw material prices and upgrades to meet tougher safety and emission rules have already boosted prices, Reuters reports. 

"I would be very happy to engage with you to see what we can do even on (GST) tax rates, what is the tinkering we can do to see to it that certain (vehicle) segments get the encouragement they deserve," revenue secretary Tarun Bajaj said at a conference organised by the Society of Indian Automobile Manufacturers (SIAM).

Bajaj, however, said he wanted to better understand from automakers why vehicle sales have been tepid over the last few years and whether it was just due to high taxes or other reasons, and what could be done to revive a sector which the government considers key to helping it meet growth targets.

Costs have surged over the years and people are finding it increasingly difficult to afford a car, R.C. Bhargava, chairman on Maruti Suzuki, India's biggest carmaker, said during the event as he made a pitch for lower taxes.

Growth in automobile sales has decelerated in India over the last few years, first due to an economic slowdown in 2019 followed by the pandemic since 2020. More recently, issues like a global shortage of semiconductors have disrupted sales.

Auto companies have for years lobbied for lower GST tax rates, which they say could help boost sales.

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