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View Poll Results: The govt. is still taxing us 120 % or more on imported cars because
To contain the number of vehicles from drastically increasing on our already congested roads and thus indirectly preventing pollution and parking space problems. 8 5.71%
To still further protect our domestic players to keep them competitive and provide adequate job opportunities by encouraging foreign players to set up factories here in India. 98 70.00%
It is a very good source of income for our govt. as there is a boom in the automobile industry currently, even during recession (only in India). 43 30.71%
Govt. does not want to make cars like Audi,BMW and Benz affordable to the common man, instead allow it to be bought only by the very rich and affluent. 15 10.71%
Others(Please Specify) 8 5.71%
Multiple Choice Poll. Voters: 140. You may not vote on this poll

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Old 7th March 2010, 23:42   #1
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Lightbulb Reason Behind the High Taxation on foreign Cars in India

Ok If I've understood it right, the main reason for taxing Foreign cars(eg. Fiat,Toyota,Ford,Audi etc) in India initially was to provide some kind of protection for domestic players like TATA,Mahindra so that they could sell their less technologically advanced cars to us Indians and stand a chance against foreign Competition. Now forward many years to present, I still don't understand the principle of further increasing the tax's on car's as we all now know that TATA has bought Jaguar and Land Rover etc. Which goes to show that even domestic players are now more than self sustainable against Foreign Competition. If so be the case don't you think it is absurd that the government is still taxing us heavily on our car's in India.

Also it could be that the Govt. is not willing to let go off this tax structure because it would mean a drastic increase in no. of vehicles on our roads. But then again it does not make any logic,because a person who would have bought a Corolla based on the present tax structure would possibly buy BMW 3 series if the tax wasn't there at all.

Anyways To get a clearer picture of why our government still tax's us heavily on our car's, I've thought of starting a poll with few important and possible points.Would really love to know what you guys think on T-bhp also please tell me if there is any other point I missed out. Please give your reason and brief explanation on why you chose your option
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Old 7th March 2010, 23:59   #2
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Its simple. It helps if the MNCs setup their manufacturing units in India - employment, for one is a major benefit.
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Old 7th March 2010, 23:59   #3
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The official reason is to protect the companies that produce cars in India. The high duties are supposed to encourage manufacturers to set up factories in India rather than import cars from abroad. This has worked to an extent and you have now got major companies setting up shop in India. However, it has also resulted in higher prices for the consumer. Not only that, we get poorer quality and less safe cars for prices that are higher than in some other markets. Sometimes working converse to the intent, the high duties also lead to some companies being confined to the fringes, with low volumes and high margins from their imported wares. High duties result in low volumes for them, which in turn do not provide justification for these companies to set up full fledged manufacturing in the country. I also get the feeling that some of these companies hide behind the duties to justify the high margins and the ultra luxury positioning their brands carry. It allows them to skim the cream from the market. For you and me, it means paying double the price for certain brands, in comparison to what customers in much richer countries pay.
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Old 8th March 2010, 00:04   #4
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The high taxes are a form of protectionism. To get a good idea of the forces that are acting to keep the high taxes in place, think about the vested interests in place.

The companies that will get affected are those that have a large share of the market, namely Maruti, Tata and Hyundai. These companies would have cozy relations with the relevant government officials and bureaucrats, who will then work to avoid any decrease in the taxes.

There is a lot of inertia in the way our country is run. Those that are in power (government or otherwise) make substantial sums of money as per the structures already in place. Change is something nobody wants, unless there's a way to profit from the change (for those same folks in power).

I dont think revenues have anything to do with it. The amount the government is currently earning on the few hundred direct imports every year would be hugely eclipsed if the customs duty was brought down from 100+% to around 20%, because the volume of cars imported would then increase multiple times.

Last edited by theEnd : 8th March 2010 at 00:05.
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Old 8th March 2010, 00:15   #5
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its all to do with earning extra revenue through the massive taxes.
and don't expect the taxes to go away any sooner (at least in this life time).
people who have payed the excess taxes for buying a car would be extremely pissed if the taxes were removed now
rather than gradually reducing the taxes on imported cars they are increasing them!!!.
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Old 8th March 2010, 04:02   #6
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High import duties help force those companies serious enough to stay in the market to set up assembly/manufacturing facilities thus providing jobs to Indians. Every country has this kind of duty structure - may not be 120% though. For example, US has what they call "Chicken tax" on imported vehicles. Japan also has the same - and on top of that they have what other countries call "non-tariff barriers" which help to keep imported cars away. So nothing new and no big deal. I support the tax.
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Old 8th March 2010, 06:03   #7
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Govt is minting hell a lot of money from the people buying these imported cars; IMO, what is bound to happen is, as long as automobile industry is bullish, the manufacturer, the Govt, all of them make money; once they fall, Govt will probably reduce their share (tax) little little bit & this trend will continue until those companies setup their factories here & start assembling their vehicle from engine to emblem.

Its not only with cars, but also with the motorcycles; check out the 12 HD motorcycles prices that have become unaffordable in India due to the 100% taxation.
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Old 8th March 2010, 07:56   #8
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In a country where atleast 60% are malnourished, where 30% cannot afford 2000kcal/day the imports are more than luxury. It is to be available only to those who can pay a premium. I think any luxury car above say 30 l should be similarly taxed, be it import or indegenous.
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Old 8th March 2010, 09:32   #9
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OT: Because I do not want mayawatis 4000 cr worth to double, I do not support such taxes.

The point being that the taxes are justified as long as they are being put to good use.
not in the current manner.

@mayjain : i agree to what you are saying, higher duties do not really help companies judge market conditions by volumes they are able to sell - owing to the high prices
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Old 8th March 2010, 09:53   #10
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I think its high time atleast the Government takes a decision on reducing the tax by some margin a 10%-20% decrease, that would still make the foreign manufacturers think about setting up units but also bring the car prices a tad lower.


Quote:
Originally Posted by singh.amrit View Post
OT: Because I do not want mayawatis 4000 cr worth to double, I do not support such taxes.

The point being that the taxes are justified as long as they are being put to good use.
not in the current manner.
Yes it pains seeing money being wasted upon parks and statues, but I am happy for the fact that i can see with my eyes where the govt. is wasting money rather than think for 5 years and search various articles to where the money went.
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Old 8th March 2010, 09:54   #11
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If the market prices mimicked the pricing in countries abroad, we'd be in deep trouble.

1) say, the A8 costs about 37lacs in the US. If that were the price it was sold at here, then you can imagine the condition our already-packed roads would be in. Those driving corollas would have A4s and inflation would well....inflate.

2) The govt. as it is subsidises petrol for our country. Removing import restrictions means more powerful engines which in turrn spells more fuel consumption. In times where there are violent protests over the raising of petrol prices by a few rupees, can we be so irresponsible as to burn it up without due deliberation?

So while it might be tough days for Petrolheads, the economy remains solid thanks to these restrictions

Last edited by Nitronium : 8th March 2010 at 09:56.
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Old 8th March 2010, 10:18   #12
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No, govt is not taxing anything to save our roads or reduce taxation. If that was the logic they would have taxed out all cars out of the reach of the common man.
A 1 crore lambhorgini does not occupy as much space as 30 alto's right?
The only reason is Auto Industry lobby. If in the 1990s, import duties would have been slashed, the nascent auto industry would have been aborted before birth.
Even today, if the duty goes down to lets say 25%, imagine the fate of Tata and Mahindra with a Grand Vitara selling for 8-9L, a fortuner for 12-14L and an endeavor for 10L. Add to that a camry for a mere 11L and cars like corolla for 8L or so(direct import from thailand).

The high duty encourages manufacturers to setup factories locally.
Apart from that the Auto industry, like all big industries, has tremendous clout in the financial sector. They employ lot of people, and the govt listens to them big time.
So do not expect the duties to go anytime soon now.
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Old 8th March 2010, 10:30   #13
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IMO it is a good thing that the import tax on cars is high. It may not help us enthusiasts but on the whole, the economy develops because it forces the companies to set up manufacturing bases in India so as to keep their costs low and sustain competitiveness.
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Old 8th March 2010, 10:50   #14
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Exclamation How do we encourage building factories here ??

OK I honestly don't know about this so i need your help guys. How actaully would it encourage manufacturers from setting up plants in India. Do you mean to say Manufacturers who build cars in India have a substantial tax reduction than direct imports ?? If so what is the % as tax that we indirectly pay for these Indian built foreign cars ?? It has to be way less than 120 % for sure but how much exactly will the tax's reduce in that case ??
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Old 8th March 2010, 11:01   #15
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Lightbulb Dilemma ??

OT: Honestly if you ask me,nothing is going to stop Indians from buying more cars. What India should do is take evasive population control measures first.

Stop spending on freaky funny statues of politicians.

Taxing is not right.The rate of buying cars would more or less be the same only if you ask me. Ok maybe usage of petrol might increase since everyone would buy more powerful engines.But wouldn't those engines run on higher octane fuel on the first place which would cost more ???

And I think if the Manufacturers do get a high volume of sales, probably they would be encouraged to come set up plants in India to further increase their profits. Though immature this is what i really think. Don't really know much about inflation and stuff and how it's affected by the automaobile industry.What I think is inflation is affected by the high land prices and huge population.

OT again: Why are land prices sky high in places like Mumabi and Chennai, i don't think it's because of people like us that it increases. It's because of politicians and Celebrities. I think the govt. has to seriosuly take steps and make a totally new tax structure (which is impossible). Tax politicians and Celebrities slightly higher. And for God's sake reduce tax's on car's because i don't think you're spending that money on our infrastructure properly enough.
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