. Tax on automobiles in India among highest in the world SHALLY SETH MOHILE TAXING TIMES factory price and an acquisition tax of Mumbai, 21 September up to 7 per cent. Primary Tax rate Other taxes Russia levies a 20 per cent VAT and indirect tax (%) an excise tax which is governed by the n the goods and services tax (GST) India GST 28 3 to 22 horsepower of the vehicle. The specif- regime, India levies one of the high- S Korea VAT 10 Consumption tax 5% of ex-factory ic rate increases according to the horse- I est taxes on vehicles among key price, acquisition tax up to 7% power. The UK levies a VAT of 20 per world markets when compared with the cent. Automobiles also attract taxes on GST equivalent value-added tax (VAT) Russia VAT 20 Horsepower-based excise tax ownership and an excise based on CO2 levied in other countries. UK VAT 20 Taxes on ownership, carbon dioxide emissions. Similarly, Japan levies a ton- Cars and two-wheelers attract a GST emission-based excise nage tax based on the vehicle weight rate of 28 per cent in India and a cess that US No indirect tax NA Average mileage-based gas guzzler tax and a consumption tax of 10 per cent ranges from 3 to 22 per cent, taking the Japan Consumption tax 10 Vehicle weight-based tonnage tax plus an environment performance levy. effective tax rate to up to 50 per cent. China VAT 16 Consumption tax of 1-40% ,vehicle Favouring the argument of a GST The GST was implemented in July purchase tax 10% cut by auto companies in India, tax 2017 and subsumed a host of indirect experts said, in the current times, the taxes, including excise duty, VAT and Germany VAT 19 VAT 19% objective should be to improve aggre- entertainment tax. France VAT 20 NA gate demand in the economy. The GST issue on automobiles — Source: European Automobile Manufacturers’ Association “An increase in demand would that has often been a contentious issue improve the overall economic activity between auto firms and policymakers and is expected to increase to 110 For the sake of comparison, the and generate employment which would — was back in the spotlight last week. cars/1,000 by 2050,” said Puneet Gupta, study includes only the taxes levied further push the demand up in a snow- A note by an unnamed finance min- associate director at IHS Markit, a sales before the vehicle leaves the showroom. balling effect. Speed is the essence here istry official spurned the proposal for a forecast and market research firm. It excludes charges borne by buyers so that base economic activity is pre- rate cut put forth by the industry. GST Amid dwindling sales and the Covid after purchase. This includes registra- served and not allowed to dry down due rates on automobiles under the cur- pandemic, which dented volumes fur- tion, road tax, insurance charges and to lack of demand,” said Waman Parkhi, rent tax regime are less than what VAT ther, automakers have been pitching for ownership tax, among others. partner, indirect tax at KPMG. and excise duty rates used to be, said a GST rate cut for more than a year now. Countries such as South Korea, A decade back, in equally challeng- the ministry official, justifying turning Most recently, Shekar Viswanathan, China, Russia, the US, the UK, Japan, ing times, a reduction in excise duty on down the proposal to cut tax. vice-chairman at Toyota Kirloskar France and Germany, in addition to the cars from 24 per cent to 8 per cent over “The total cost of ownership in India Motor, said the unviable tax structure basic VAT, have their own taxation the period of 2006-2009 had helped is the highest among key markets of in the country needs to be rationalised. framework, shows a study on tax rates revive demand in the economy, said the world. India is today the fifth At auto industry’s annual conference, compiled by the European Automobile Parkhi. “Instead of focusing too much on biggest market but it’s mainly driven by Kenichi Ayukawa, managing director Manufacturers Association (ACEA). tax revenues or whether cars are an elite low-priced vehicle as taxes on big cars (MD) and chief executive officer (CEO), For instance, South Korea, in addi- consumption, the focus could be on are too high. The penetration of vehi- Maruti Suzuki India, also batted for a tion to a VAT of 10 per cent, attracts a doing everything that rejuvenates eco- cles is low at 33 cars/1,000 households duty cut to boost demand. consumption tax of 5 per cent of the nomic activity,” he added.