NEW DELHI: India’s largest carmaker- Maruti Suzuki - Chairman RC Bhargava late on Monday said the passenger vehicle (PV) industry can’t grow with a 50% tax rate as it makes ownership unaffordable for the common people.
“Policymakers and government treat cars as luxury items and that is why they are not affordable to a majority of the population,” said Bhargava. “You can’t grow an automobile industry with 50% taxation. Where in the world has an industry like automobiles grown with 50% taxation, but it’s the wisdom of the policymakers and the political leadership.”
Bhargava’s comment comes days after the GST Council clarified on the definition of SUVs (sports utility vehicles) for the levy of 22% compensation cess. He compared the domestic market with developed markets such as Europe and Japan, where per capita income is high but taxes on cars are much lower.
“Now, somebody needs to think about that, should cars be charged more than the average rate of taxation… If it is, then we are, in some way, accepting the thing that cars or luxury products should be taxed more than non-luxury products, which is the old socialist way of thinking and taxation,” he said.
Bhargava said due to low affordability and sluggish growth of the automobile industry, India will take at least 140 years to catch up with China’s penetration of car ownership. He said the regulatory burden is the highest on small cars, a key segment of the Indian automobile industry and having a uniform tax structure across all segments of vehicles will not augur well for the sector growth.